* Exporters, financials and real estates decline sharply * Euro-senstive stocks bear brunt of selling * 25-day MA of 11,144.65 short-term support - analyst By Ayai Tomisawa TOKYO, Feb 26 (Reuters) - Japan's Nikkei share average dropped on Tuesday, retreating from a 53-month high marked the previous day, as the yen rose on uncertainty following the Italian elections, hurting exporters with exposure to Europe such as Sony Corp and Nikon Corp. The Nikkei dropped 1.9 percent to 11,437.78 in mid-morning trade. On Monday, the Nikkei had risen 2.4 percent to 11,662.52, its highest level since late September 2008. A heavy sell-off greeted early trade as investors who bought exporters and financials unwound their positions. Sony Corp, Mazda Motor Corp and Nikon Corp , which have relatively big exposure to the euro zone economy, suffered a big selloff and dropped between 2.5 percent to 3.6 percent. Financials and real estate companies, beneficiaries of the government's reflationary policy, also took a breather, with Mitsubishi UFJ Financial Group shedding 2.1 percent, Mizuho Financial Group dropping 2.4 percent and Mitsubishi Estate Co sliding 1.9 percent. "The stock market hates uncertainty the most. As aggressive buying lifted the market sharply yesterday, we will likely see the opposite today," said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities. "Investors are worried about a hung parliament in Italy, and there are fears that the country may have to return to the polls in a short-period of time." He added that the Nikkei's support line is seen at its 25-day moving average of 11,144.65 for this week. The broader Topix dropped 1.5 percent to 966.29. On Monday, U.S. stocks suffered their biggest drop since November after a strong showing in Italian elections by groups opposed to the country's economic reforms triggered worry that Europe's debt problems could once again destabilize the global economy. Against the yen, the euro hit 118.86 yen, the weakest since Jan. 24, while the dollar dropped to 91.75 yen , reversing earlier gains that drove it to a more than 33-month high of 94.76 yen, according to Reuters data. Italy's centre-left coalition holds a slim lead over former Prime Minister Silvio Berlusconi's centre-right bloc in the election for the lower house of parliament, three TV projections indicated. But any government must also command a majority in the Senate, a race that is decided by region. In Japan, investors cheered news on Monday that the government was likely to nominate Asian Development Bank President Haruhiko Kuroda, an advocate of aggressive monetary easing, as its next central bank governor. Analysts said that while the Japanese market is unlikely to be immune from euro-zone problems in the short run, expectations that Prime Minister Shinzo will continue to pursue bold policies to reignite the economy is supporting long-term investors' appetite for Japanese stocks. "A negative impact (from Europe's problems) to the Japanese market is unavoidable for now, but hopes for Abenomics have not changed," said Takuya Takahashi, a strategist at Daiwa Securities.