Japan's Nikkei stock average lost 1.1 percent on Wednesday as Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) and other exporters slipped after surprisingly poor U.S. retail sales data dampened hopes for an economic recovery and sent the yen higher. But defensive stocks such as pharmaceuticals gained, while Aeon Co Ltd (8276.T: Quote, Profile, Research, Stock Buzz) and other retailers rose despite disappointing earnings results as investors reckoned most of the bad news for the sector was likely out for now. Investors moved to lock in profits after recent sharp rises, with the benchmark Nikkei posting its third straight day of losses, its first such run in nearly two weeks. "The situation is that we're heading into earnings results season and most of the news of economic stimulus plans is out already, so there's a sense in the market that all we'll hear for a while will be bad news," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "Whether we were in a true bear market rally or not I can't say, but now we appear to have entered a time of consolidation." U.S. retail sales in March ended two months of increases and sparked selling across the board on Wall Street on Tuesday, with shares of retailers, big manufacturers and energy companies among the casualties. The Standard & Poor's 500 Index .SPX slid 2 percent. .N "The retail sales data betrayed market hopes, really disappointing investors," said Katsuhiko Kodama, senior strategist at Toyo Securities. "But people had been buying the market on expectations and this sort of downward adjustment is only to be expected." The benchmark Nikkei .N225 shed 99.72 points to 8,742.96, while the broader Topix .TOPX fell 1 percent to 835.25. DOLLAR DENTED Activity thinned slightly ahead of keenly awaited U.S. bank earnings, with JPMorgan (JPM.N: Quote, Profile, Research, Stock Buzz) set to report results on Thursday and Citigroup (C.N: Quote, Profile, Research, Stock Buzz) on Friday. "The market is also watching U.S. housing starts data due out on Thursday. If this betrays hopes too, the downward adjustment by stock markets could go on longer," said Kodama at Toyo Securities. The dollar lost 0.5 percent against the yen on the day, although it was off earlier lows, as optimism about a global economic recovery ebbed following the retail sales figures. It was trading around 98.46 yen, denting investor enthusiasm for exporters, whose profits go down when repatriated if the yen is strong. Canon fell 2.6 percent to 3,030 yen and Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) lost 4.3 percent to 2,445 yen. Hitachi Ltd (6501.T: Quote, Profile, Research, Stock Buzz) lost 4 percent to 313 yen. But carmakers pared losses, with Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) down 0.7 percent at 2,725 yen and Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) flat. Bank shares fell as investors locked in profits after recent gains that were prompted by upbeat results from Wells Fargo (WFC.N: Quote, Profile, Research, Stock Buzz) last week and as worries about bad assets remain, market analysts said. Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz), Japan's top bank, dropped 3 percent to 521 yen and No.2 Mizuho Financial Group (8411.T: Quote, Profile, Research, Stock Buzz) slid 2 percent to 192 yen. Top brokerage Nomura Holdings Inc (8604.T: Quote, Profile, Research, Stock Buzz) tumbled 7.7 percent to 597 yen. But pharmaceuticals bucked the trend. Astellas Pharma (4503.T: Quote, Profile, Research, Stock Buzz) rose 2.9 percent to 3,230 yen and Takeda Pharmaceutical (4502.T: Quote, Profile, Research, Stock Buzz) gained 2 percent to 3,600 yen. Retailers gained, with Aeon Co Ltd (8267.T: Quote, Profile, Research, Stock Buzz), Japan's second-largest, jumping 5.2 percent to 774 yen even after reporting its first annual net loss in seven years and its outlook for this year fell short of the consensus view. The sector has reported largely grim earnings, hit by the slumping economy, but market analysts said the rise appeared to be a combination of relief that all the bad news is out for now and a sense that the sector has underperformed recently. Elpida Memory (6665.T: Quote, Profile, Research, Stock Buzz) sank 2.5 percent to 950 yen after rising as much as 8 percent in morning trade, after Japanese government officials denied they had agreed to inject public money into the chipmaker. Trade slowed on the Tokyo exchange's first section, with 2.3 billion shares changing hands, compared with last week's daily average of 2.5 billion. Declining stocks outnumbered advancing ones, 871 to 716.

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