TOKYO, May 27 (Reuters) - Japan's Nikkei share average

dropped on Tuesday, pressured by a stronger yen that dampened

sentiment, while most investors refrained from active trading

amid a lack of clear market-moving catalysts.

The Nikkei was down 0.24% at 37,440.32 by the midday

break. The broader Topix held its ground at 2,752.87.

"With the U.S. markets closed on Monday, institutional

investors stayed cautious and quiet. And it looked like only

individual investors were trading small stocks," said Naoki

Fujiwara, senior fund manager at Shinkin Asset Management.

"But the market reacted to the yen's gain against the dollar

during the session," said Fujiwara.

The yen strengthened against the dollar following comments

from Bank of Japan Governor Kazuo Ueda, which signalled the

central bank's willingness to raise interest rates.

Governor Ueda said that the BOJ must remain vigilant to the

risk that rising food prices could drive underlying inflation

higher, noting that it is already close to the central bank's 2%

target.

A stronger yen generally pressures exporter shares, as it

diminishes the value of overseas earnings when converted back

into Japanese currency.

Among individual stocks, chip-making equipment maker Tokyo

Electron ( TOELF ) fell 1.69% to drag the Nikkei the most.

Uniqlo-brand owner Fast Retailing ( FRCOF ) lost 0.78% and toy

maker Konami Group ( KNAMF ) slipped 1%.

Shares of staffing agency Recruit Holdings ( RCRRF ) rose

1.37%, while game maker Nintendo ( NTDOF ) also advanced, gaining

0.84%.

Drugstore operator Tsuruha Holdings ( TSUSF ) climbed 1.51%

after shareholders approved its merger with Welcia Holdings ( WLCGF )

, despite opposition from U.K.-based fund Orbis

Investment.

On the Tokyo Stock Exchange's prime market, 58% of the over

1,600 listed stocks advanced, 36% declined, and 5% remained

unchanged.