Japan's Nikkei average fell 2.1 percent on Thursday as exporters slid on a firmer yen and renewed concerns about the U.S. economy, while Nikon Corp <7731.T> tumbled after it forecast its first annual operating loss in 11 years.

Panasonic Corp <6752.T> fell after a newspaper said the consumer electronics maker is likely to post a net loss of more than $1.1 billion this financial year.

Stocks affected by a reshuffle in the MSCI Japan Index <.MSCIJP> saw active trade. Chipmaker NEC Electronics <6723.T> plunged more than 10 percent after being dropped and car battery maker GS Yuasa Corp <6674.T> gained after being included.

Sales at U.S. retailers fell for a second straight month in April, breaking a string of more upbeat reports that had suggested the economic slump was abating and weighing on the Dow Jones industrial average <.DJI>, which fell 2.2 percent.

U.S. retail data proved the market had been too optimistic about a recovery in the economy, said Takahiko Murai, general manager of equities at Nozomi Securities.

It has become hard to buy stocks sensitive to the economic cycle such as exporters or materials companies, he said.

The benchmark Nikkei <.N225> shed 199.62 points to 9,140.87. It gained 0.5 percent the previous day to inch back toward a six-month closing high struck earlier in the week.

The broader Topix <.TOPX> slipped 2.1 percent to 870.07.

Nikon, a Japanese camera and precision equipment maker, sank 6.2 percent to 1,388 yen, after forecasting an annual operating loss as chipmakers slash spending, although the loss was smaller than market expectations.

Panasonic declined 2.9 percent to 1,411 yen.

NEC Electronics tumbled 10.6 percent to 925 yen, while GS Yuasa Corp <6674.T> added 2.6 percent to 700 yen.

Exporters fell as investors fret over a stronger yen which curbs their profits when repatriated. The dollar fell as low as 95.14 yen on a trading platform EBS, its lowest since March 20.

Toyota Motor Corp <7203.T>, the world's biggest automaker, skidded 3.3 percent to 3,540 yen, while Canon Inc <7751.T> lost 3.3 percent to 3,200 yen.

(Reporting by Aiko Hayashi; Editing by Edwina Gibbs)