* Profit-taking hits automakers after rises, Toyota down
* With earnings pace ebbing, eyes turn to U.S. jobs data
* Trader Mitsui & Co jumps after earnings, target price hike
* Nikon posts surprise Q1 profit but sees bigger annual loss
By Elaine Lies
TOKYO, Aug 5 (Reuters) - Japan's Nikkei average lost ground on Wednesday as investors took a breather after it hit a 10-month high the day before, with Toyota Motor Co down after reporting a third straight quarterly loss. Fast Retailing dropped 3.5 percent after saying same-store sales at its Uniqlo casual clothing chain in Japan fell for the first time in nine months in July.
But analysts said that while investors were moving to lock in profits after days of rises that saw the benchmark Nikkei touch successive 10-month highs, there was little change in the market's overall rising trend. "Trade's relatively thin, and in a situation like this selling at the highs simply invites more selling," said Hideyuki Ishiguro, a supervisor in the investment advisory department of Okasan Securities. "Basically it seems as if the breadth of recovery in the electronics and auto sectors is pretty good, and if the U.S. jobs data is good I don't think we have much to worry about."
After the bell precision equipment and camera maker Nikon Corp reported a surprise quarterly profit, having offset weak demand for its chip equipment with cost cuts, but said it expects wider losses this year.
The Nikkei shed 1.2 percent or 122.48 points to 10,252.53 a day after rising to a 10-month high of 10,479.19 and also hitting a 10-month closing high.
The broader Topix lost 1 percent to 949.58.
Market players say the next targets for the Nikkei will be 10,500, which is psychologically important and also a target level for futures and options, and 10,800, which was last seen in October.
"Given that the Nikkei rose 1,000 points in a bit over two weeks, what's losing 100 points here or there?" said Yutaka Miura, a senior technical analyst at Mizuho Securities.
"There's a slight sense of overheating and investors are just taking a break."
He added that a slightly stronger yen and shaky U.S. stock futures were also pressuring the Nikkei. The dollar lost 0.3 percent to 94.91 yen and S&P 500 futures fell 0.4 percent.
With the bulk of Japan's earnings season over, investors will shift their focus to economic indicators to gauge the progress of recovery in the global economy.
The U.S. economy is expected to have lost 320,000 nonfarm payroll jobs in July, a hefty number but still an improvement over last month's drop of 467,000. The unemployment rate is expected to have risen to 9.6 percent. The figures will be released on Friday.
The ADP National Employment Report for July is due on Wednesday.
CARMAKERS LOSE GROUND
Toyota lost 1.2 percent to 3,980 yen after the automaker said it slipped to its third straight quarterly loss as sales sank in Japan, Europe and the United States, though it forecast a slightly shallower annual loss.
While the global downturn is hammering automakers everywhere, Toyota's results contrasted with surprising first-quarter profits at domestic rivals Honda Motor Co and Nissan Motor Co.
But market players were optimistic over the longer term, saying it was a surprise that such a conservative firm as Toyota had lowered its loss forecast, and profit-taking was inevitable after the sector's recent gains.
"While Toyota certainly does seem to be lagging Honda and Nissan, especially in places like China, it seems as if global demand may be poised for a recovery. Toyota's overall situation is not that bad," said Okasan's Ishiguro.
Honda fell 1.3 percent to 3,000 yen and Nissan lost 1.9 percent to 681 yen.
Car parts firms such as Denso Corp were also hit by profit-taking. Denso lost 5.6 percent to 2,700 yen and Bridgestone, the world's largest tyre maker, fell 2.2 percent to 1,678 yen.
One bright spot was Mitsui & Co, which rose 1.9 percent to 1,271 yen after Nomura Securities lifted its target price to 1,565 yen from 1,400 yen and reiterated its "buy" rating on the stock, following an earnings report from the trading house that came out in trading hours on Tuesday.
Daikyo Inc surged 8.2 percent to 172 yen after the condominium developer raised its interim profit forecast five-fold citing unexpectedly strong apartment sales and cost-cutting.
Trade volume slipped on the Tokyo exchange's first section, with 1.9 billion shares changing hands, compared with last week's daily average of 2 billion.
Declining stocks outnumbered advancing ones by nearly 2 to 1. (Editing by Michael Watson)