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Nikkei falls more than 1 pct on Ukraine, pension fund selling

An employee of the Tokyo Stock Exchange (TSE) looks at a monitor at the bourse at the TSE in Tokyo March 3, 2014. REUTERS/Issei Kato

By Hideyuki Sano and Tomo Uetake

TOKYO (Reuters) - Japanese shares fell more than one percent on Thursday, hit by renewed anxiety over the crisis in Ukraine and pressured by Japanese pension fund selling ahead of the financial year-end next week.

The Nikkei share average fell 1.4 percent to 14,268.28, closing in on this month's low of 14,203.21, marked on March 17, though about half of the losses were due to the effect of many shares going ex-dividend.

The news that the United States and the European Union had agreed to work together to prepare possible tougher economic sanctions on Russia undermined risk appetite.

As a result, Wall Street shares dipped from near record levels and the yen also strengthened to a one-week high, which both weighed on Tokyo shares.

In addition, Japanese stocks have been underperforming since the start of this year because investors also grew impatient about the lack of progress in structural reforms after massive fiscal and monetary stimulus last year.

"The international situation, the yen's rise and fatigue over Abenomics are all putting pressure," said a fund manager at a Japanese asset management firm.

"But I think the market will likely be supported around current levels," he added, noting that most investors expect the Ukraine crisis to gradually ease and Japanese corporate profits to grow further in the next financial year from April.

Bulls regard levels around a four-month low just under 14,000 hit in early February as strong support, on the grounds that the Nikkei's P/E would be below 14 around that level.

"The impact of geopolitical risks normally does not last long. I think the market will be supported around recent lows given the valuation," said Ryota Sakagami, chief equity strategist at SMBC Nikko Securities.

Many market players also said some selling likely came from Japanese pension funds, which need to cash out part of their assets at the end of the financial year on March 31.

Stocks offering high dividends or other shareholder benefits dropped sharply as many of them went ex-dividend on Thursday.

The securities sector fell 2.9 percent and the wholesale sector, which include high-dividend-paying trading houses, dropped 2.7 percent to become the worst two performers of the Topix's 33 sectors.

Among trading houses, Itochu Corp <8001.T> led, falling 5.7 percent in heavy trade.

Toyota Motor <7203.T> bucked the trend by eking out a 0.1 percent gain after the carmaker announced a share buyback on Wednesday.

The broader Topix shed 1.4 percent to 1,155.77 in moderate trade, with trading volume at 37.5 percent of the full daily average for the past 90 days.

The JPX-Nikkei Index 400, a recently introduced gauge comprised of companies with a high return on equity and robust corporate governance, also dipped 1.4 percent to 10,461.04.

(Editing by Jacqueline Wong)