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* Nikon nosedives on sharp profit outlook cut * Mazda and Fuji Heavy attractive - trader By Ayai Tomisawa TOKYO, Feb 7 (Reuters) - Japan's Nikkei share average retreated on Thursday from a more than four-year high hit a day earlier as a pause in the yen's decline and caution ahead of a European Central Bank meeting gave investors reason to take profits on export-driven firms. The Nikkei average shed 0.9 percent to 11,361.05, retreating from the high of 11,498.42 struck on Wednesday. The yen, which fell to a 33-month low of 94.08 to the dollar on Wednesday, last traded at 93.39. Nikon Corp plummetted 19 percent to a daily limit of 2,139 yen and its lowest level in more than two months, as its sharp cut in its outlook disappointed investors who had chased the stock higher over the past three months. The stock was the biggest loser on board in percentage terms and dragged down the precision machinery sector, which lost 5.5 percent. The camera maker, whose shares had climbed 45 percent since mid-November when Prime Minister Shinzo Abe calls for aggressive monetary easing put the yen on a long slide, slashed its operating profit forecast by a third, citing sluggish sales of interchangeable-lens cameras due to increased competition. "Nikon's sharp cut in its outlook startled us... I'm not surprised if investors are dumping the stock immediately and even shorting it as there are better stocks to buy," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management. Akino regarded exporters as Mazda Motor Corp and Fuji Heavy Industries Ltd as attractive due to their bright earnings. Mazda Motor rose 7.8 percent after the carmaker raised its operating profit forecast for the year ending March 31 by 80 percent to 45 billion yen ($482 million), which would be its highest since the year ended March 2008. Shares of Mazda, which exports about 80 percent of its cars, were the most-traded by turnover on the main board. Fuji Heavy, which makes Subaru cars and is seeing strong sales in the United States,its biggest market, was 2.4 percent higher after raising its operating profit outlook by 25 billion yen to a record 107 billion yen. Market strategists said a correction is natural after recent sharp gains in the Japanese market, but it was likely to rise in the mid-to-long term on hopes for aggressive monetary easing. Investors were expected to take a wait-and-see approach ahead of a meeting of European Central Bank policymakers later on Thursday that could impact the currency market. "Hopes for 'Abenomics' are supporting the mood, but investors are also sensitive to the currency moves, so right now, even small uncertainty on Europe can be a reason to pull back," said Hiroichi Nishi, an assistant general manager at SMBC Nikko Securities. Bank of Japan Governor Masaaki Shirakawa on Tuesday said he would step down, together with his two deputies, three weeks before the end of his five-year term in April. Prime Minister Shinzo Abe has put the central bank under relentless pressure to do more to pull the economy out of the doldrums. He has made it clear that he wants a governor who will be bolder in loosening monetary policy. The broader Topix was flat at 968.76.