* Euro-sensitive exporters underperform * GS Yuasa tumbles on Mitsubishi Motors' battery overheating By Ayai Tomisawa TOKYO, March 28 (Reuters) - Japan's Nikkei share average dropped on Thursday as exporters fell on weakness in the euro due to concerns about Italy's funding costs and the rescue deal for Cyprus. The Nikkei dropped 0.8 percent to 12,390.18, staying below its 5-day moving average of 12,448.48. Exporters with high exposure to the euro zone such as Mazda Motor Co and Sony Corp underperformed, falling 2.5 percent and 4.0 percent, respectively, after political uncertainty in Italy drove its borrowing costs to five-month highs. The euro last traded at 120.45 yen after dipping to a fresh one-month low around 119.95 yen. "We have major events to look forward to next week (in Japan), so investors may not build large positions this week, and worries about Europe are souring the mood," said Kenichi Hirano, a strategist at Tachibana Securities. Next week, the Bank Of Japan's tankan survey is scheduled to be released on Monday while the central bank's first policy meeting under its new leadership will be held April 3-4. Sources told Reuters the BOJ is likely to start open-ended asset purchases immediately, rather than in 2014, and consider setting a new target to buy longer-dated bonds at its rate review next week. On Thursday, GS Yuasa Corp, which makes lithium-ion batteries for Boeing Co's 787 Dreamliner jet and for some automakers, tumbled 14.5 percent after Mitsubishi Motors Corp said a lithium-ion battery on their plug-in hybrid Outlander vehicle overheated last week. The automaker shed 3.9 percent. "Investors are adjusting their positions as the Nikkei has gained sharply in a short period of time," said Nobuhiko Kuramochi, a strategist at Mizuho Securities. The Nikkei has gained 19 percent this year on Prime Minister Shinzo Abe's bold monetary and expansionary policies, lifting exporters and such reflationary stocks as banks and real estate stocks. During the term, the benchmark S&P 500 has gained 9.6 percent, the Dow Jones industrial average has added 11 percent and the FTSEurofirst 300 index has merely advanced 4.4 percent.