(Reuters) - Japan's Nikkei share average tumbled 2.6 percent to a one-week low on Monday morning after Japan's economy unexpectedly slipped into recession.

The news prompted investors to take profits after recent gains stemming from expectations Prime Minister Shinzo Abe will postpone a planned sales tax hike.

Japan's economy unexpectedly shrank an annualized 1.6 percent in July-September after a severe contraction the previous quarter.

Traders said the GDP figure made investors risk-averse.

The Nikkei benchmark closed the morning session down 2.6 percent to 17,037.65. It touched 16,993.89, its lowest level since Nov. 11.

"The GDP figure proved that it was foolish that the government hiked a sales tax (in April) before pulling the country out of deflation," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "The government must come up with a measure beyond delaying the tax hike to cease recession."

Fujito said the Nikkei's downside would be limited around 16,500 as the GDP figures build the case for the Bank Of Japan to keep easing policy.

Even with Monday's fall, the Nikkei is up 8.8 percent since Oct. 31, after the BOJ announced additional easing and the Government Pension Investment Fund decided to increase its allocation to Japanese equities.

A trader at a foreign brokerage said investors expect the BOJ to buy exchange-traded funds (ETFs) Monday afternoon.

"Anytime the Topix is down in the a.m. session, you would think there may be some ETF buying in the p.m. session," he said.

The BOJ announced on Friday it bought 38 billion yen of ETFs, part of its beefed-up economic stimulus campaign.

Retail stocks were weak. Takashimaya Co shed 5.1 percent and Seven & i Holdings Co 2.2 percent.

Toyota Motor Corp dropped 0.9 percent and Honda Motor Co 2.5 percent. The dollar quickly pulled back to 115.76 yen after jumping to a seven-year high of 117.06 yen on the GDP numbers.

Mitsubishi UFJ Financial Group soared 3.0 percent after announcing plans to buy back 100 billion yen of shares. The broader Topix dropped 2.1 percent to 1,371.19, and the JPX-Nikkei Index 400 declined 2.2 percent to 12,506.79.