TOKYO, Sept 10 (Reuters) - Japanese stocks fell on Thursday as a surprise drop in machinery orders in July heightened concerns about the economy, prompting investors to book profits a day after the market posted its biggest gain in nearly seven years.
The Nikkei share average dropped 2.5 percent to close at 18,299.62, shedding about a third of Wednesday's 7.7 percent jump, which was the biggest single-session rise for the benchmark index since October 30, 2008.
The pullback came after data showed Japanese machinery orders unexpectedly fell for a second straight month in July, fuelling concerns that weak business investment could undermine a recovery from an economic contraction in the second quarter.
Market players said recent volatility has been driven by short-term traders while long-term investors are waiting out the uncertainty.
Apple's Japan-based suppliers underperformed, tracking a decline in the tech giant's shares after a launch event for its latest products failed to cheer investors.
Nitto Denko shares fell 4.3 percent while Murata Manufacturing lost 2.3 percent and TDK declined 2.8 percent.
The broader Topix dropped 1.9 percent to 1,479.52, with all but 3 of its 33 subsectors in negative territory. Its insurance subindex shed 4 percent. MS&AD Insurance plunged 4.6 percent as investors took profits on gains made during Wednesday's surge.
The JPX-Nikkei Index 400 fell 2 percent to 13,282.27.
Data from the Ministry of Finance showed that foreign investors stepping up their sales of Japanese stocks.
They sold a net 986 billion yen worth of shares last week, their biggest net selling in almost a year and a half, and up from net sales of 626.9 billion yen during the week prior. (Additional reporting by Ayai Tomisawa; Editing by Shri Navaratnam)