Nikkei retreats after 8-day winning streak; Subaru gains as Japan dodges more tariffs

* Some players remain cautious on auto tariff deal - analyst

* Nitori tumbles after pricing in strong operating profit

By Ayai Tomisawa

TOKYO, Sept 27 (Reuters) - Japan's Nikkei snapped an eighth-day winning streak on Thursday, losing ground as profit-taking kicked in, but some automakers rose after the United States indicated it won't impose further tariffs on Japanese automotive products for now.

Nikkei share average .N225 fell 1.0 percent to 23,796.74 in choppy trade, after flirting in positive territory in the morning.

The Nikkei had gained about 5 percent over an eight-day period to Wednesday, reaching more than eight-month highs.

"There were signs of overheating so it was natural to see a correction," said Chihiro Ohta, general manager of investment research at SMBC Nikko Securities.

The broader Topix .TOPX dropped 1.2 percent to 1,800.11, with all but the air transport sector in negative territory.

Machinery shares languished, with Fanuc Corp 6954.T falling 3.7 percent and Tokyo Electron 8035.T shedding 3.5 percent.

Discount furniture store operator Nitori Holdings 9843.T tumbled 5.6 percent although its operating profit for the March-August period rose 16.1 percent on the year to 55.8 billion yen, even topping its own forecast of 52.9 billion yen. According to traders, investors looked to negative factors such as the company's revised plan to open fewer-than-expected stores in China compared to its initial target.

U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe agreed on Wednesday to start trade talks in an arrangement that, for now, protects Japanese automakers from further tariffs, seen as a major threat to the export-dependent economy. declining issues outnumbered advancing ones 1,730 to 342, the auto sector .ITEQP.T outperformed, rising as much as 1.2 percent before ending flat. Subaru Corp 7270.T jumped 2.6 percent and Mazda Motor Co 7261.T added 0.5 percent.

Analysts said that investors welcomed the news, while some of them are looking at the developments cautiously.

"There may well be a short-term rally in auto stocks, particularly those such as Subaru that are highly dependent on the U.S. market," said Jeremy Osborne, Investment Director, Fidelity International in Japan.

However, he added that NAFTA negotiations remain an overhang for the sector and non-tariff barriers, and local content requirements or quotas on vehicle exports from Japan, may still be possible further down the line.

"The news is positive for near-term sentiment, but this is just the beginning of the process and the final outcome remains uncertain," Osborne said.

(Editing by Shri Navaratnam)