Nikkei slips as investors sell blue chips, shippers

(Adds stocks, details)

By Elaine Lies

TOKYO, June 13 (Reuters) - The Nikkei stock average gave up early gains to edge down 0.2 percent on Friday as risk-shy investors worried about the results of a Group of Eight finance ministers' meeting this weekend sold blue chips such as Hitachi Ltd (6501.T).

Shippers extended losses as a key freight index plunged, while paper firms hit by the dollar's rise against the yen tumbled, weighing on the market.

The global threat of inflation will take centre stage at this weekend's meeting of Group of Eight (G8) finance ministers in Japan, but measures to tackle it look elusive, and this has the market worried, market players said.

"This weekend is likely to be very important for the markets," said Masayoshi Okamoto, head of dealing at Jujiya Securities, noting, among other things, recent moves by U.S. officials to try and talk the dollar higher.

"As a result, nobody really wants to stay in possibly risky shares, whether short-term day traders or longer-term players, so people are lightening their holdings of big names and moving into defensive shares like Japan Tobacco."

Although New York shares rose on stronger-than-expected U.S. retail sales for May, Tokyo market players ultimately shrugged off the numbers as a one-time benefit from tax rebates and said boosts from this would be temporary at best.

Short-covering ahead of the settlement of Nikkei futures and options contracts expiring in June, known in Japan as the so-called special quotation or "SQ", boosted the market in early trade but evaporated as the morning wore on.

The contracts likely settled at 14,053.03, market participants said. The closely watched settlement price is calculated from the opening prices of the 225 shares in the Nikkei average .N225 on the second Friday of the month.

The benchmark Nikkei shed 22.31 points to 13,866.29, while the broader Topix sank 0.5 percent to 1,356.49.

SHIPPERS SINK, PAPER POUNDED

Shipping firms extended losses as a major sea freight rate index fell sharply, with the subindex .ISHIP.T down 13 percent this week after sustained strong rises.

Mitsui OSK Lines Ltd (9104.T) shed 3.3 percent to 1,393 yen, Kawasaki Kisen Kaisha Ltd (9107.T) declined 3.8 percent to 996 yen and Nippon Yusen KK (9101.T) skidded 2.4 percent to 957 yen.

The Baltic Exchange's dry freight index .BADI, which gauges the strength of seaborne trade for dry commodities such as coal, iron ore and grains, fell 8.7 percent, down for a fifth straight session.

Some in the market also view shippers as a leading indicator of market moves and said that high oil prices were starting to hit the sector hard.