* Exporters sold hit by strong yen
* Nikkei had gained 4.37 pct over the past 3 days
* Yaskawa's earnings focused after close
By Ayai Tomisawa
TOKYO, Jan 10 (Reuters) - Japan's Nikkei dropped on Thursday as gains in the yen prompted investors to take profits following a strong rally.
After rising 4.37 percent in the last three days, the Nikkei share average ended 1.3 percent lower at 20,163.80.
The Nikkei has rebounded from a low of 18,948.58 hit on Dec. 26, its lowest since April 2017, but its upside remains limited, analysts said.
"The market condition hasn't changed fundamentally since then and investors are still on edge amid global concerns," said Hiroyuki Ueno, senior strategist at Sumitomo Mitsui Trust Asset Management.
The dollar was under pressure partly because of growing expectations the U.S. Federal Reserve will pause its rate tightening cycle this year. The greenback fell 0.2 percent to 107.94 yen during Thursday's Asian trade.
Minutes from the Fed's Dec.18-19 meeting revealed that several policymakers were in favour of the U.S. central bank keeping rates steady this year.
"The Fed's monetary policy is the biggest concern, and while there are some positive developments in trade talks, the market is still not fully convinced that U.S.-China trade disputes will end anytime soon," said Sumitomo Mitsui's Ueno.
On Wednesday, delegations from China and the United States ended three days of trade talks in Beijing in the first face-to-face negotiations since both sides agreed a 90-day truce in a trade war that has disrupted the flow of hundreds of billions of dollars of goods.
Hit by profit-taking, 26 of Topix's 33 subsectors were in the red.
Large cap stocks languished, with Fanuc Corp dropping 2.4 percent, SoftBank Group Corp falling 3.2 percent and Kao Corp tumbling 4.1 percent.
Exporters lost ground, with Sony Corp shedding 3.7 percent, TDK Corp falling 2.5 percent and Daikin Industries sliding 1.9 percent.
After the market close, some companies whose business years end in February and August will announce their quarterly earnings. Companies in focus include factory automation machinery maker Yaskawa Electric Corp, which has large exposure to China.
Earnings from Yaskawa will be of particular interest, as traders look for signs of how demand from China is faring, analysts said.
"Our main focus at Yaskawa is when we see a rebound in high-margin servomotor orders," which slumped 20 percent on the year in the second quarter, said Graeme McDonald, an analyst at Citigroup.
"Given the challenging backdrop for customers geared to the smartphone value chain and the SPE and machine tool industries, we struggle to see where there will be much good news from this all-important product segment in the near term."
Yaskawa's shares stumbled 3.4 percent.
The broader Topix dropped 0.9 percent to 1,522.01. (Editing by Simon Cameron-Moore)