* Canon weighs on precision equipment sector

* Dollar-yen top heavy at 112 limiting Nikkei’s upside – traders

By Ayai Tomisawa

TOKYO, April 18 (Reuters) – Japan’s Nikkei retreated from a 4-1/2-month high on Thursday as investors took profits, while Canon tumbled on a report that it will cut its earnings forecast, pressuring other stocks in the sector.

The Nikkei share average dropped 0.5 percent to 22,172.73 points by the midday break, after touching the highest level since early December on the previous day.

Some companies with large exposure to China extended gains, after soaring the day before on robust Chinese economic data, while defensive sectors such as drugmakers languished.

With the dollar dropping below 112 yen after briefly touching a four-month peak of 112.17