TOKYO, May 22 (Reuters) - Japanese shares dropped on Tuesday morning from 3 1/2-month highs hit the previous day, with financial shares leading declines as investors booked profits on signs of an apparent peak-out in U.S. bond yields.
Helping Tokyo markets rise one day earlier was the reduction of fears of a trade war between China and the United States, which was a key factor behind Wall Street's solid gains overnight.
Japanese insurance companies .IINSU.T extended their fall so far this week to 3.8 percent, as U.S. bond yields have slipped from near seven-year highs. Higher U.S. yields were seen as boosting investment returns for Japanese insurers.
Investors locked in gains in the sector, one of the best performers since March as trade war worries had engulfed exporters and others vulnerable to tariff threats. .IBNKS.T shed 0.7 percent, with MUFG 8306.T falling 1.1 percent.
Most sectors were down among Topix 33 sector indexes .TSEK , with only two with strong relations to resources - oil companies .IPETE.T and wholesale companies .IWHOL.T - making substantial gains, thanks to firm energy prices. (Editing by Richard Borsuk)
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