* Investors eyeing status of companies operating in quake zone
* Nikkei has gained 6.6 pct for the week
* Foreigners net buyers of Japan stocks for 1st time in 14 weeks
By Ayai Tomisawa
TOKYO, April 15 (Reuters) - Profit taking in most sectors forced Japan's Nikkei share average a little lower on Friday morning, after sharp rallies over the past few days.
The Nikkei retreated 0.3 percent to 16,861.77 in midmorning trade, after soaring 3.2 percent on Thursday to its highest level in more than two weeks.
In the past three days, the Nikkei added 7.3 percent, or 1,159 points. For the week, the index has risen 6.6 percent.
Stock market participants saw a limited impact from a strong earthquake hit southwestern Japan on Thursday, but they said they will keep an eye on companies which have plants in the region.
Honda Motor Co suspended output at its motorcycle factory near Kumamoto following the quake, a company spokesman said. The stock barely moved, and stood 0.3 percent down.
Mitsubishi Electric Corp and tire maker Bridgestone Corp also suspended operations at their factories in the area, Kyodo news agency said. Mitsubishi rose 0.6 percent and Bridgestone shed 0.1 percent.
Traders say that Thursday's rally was mostly unwinding of short-term hedge funds' 'buy yen, sell stock' positions.
"The market can still be volatile as the direction does not depend on fundamentals now," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "When the market rises more than 1,000 points in a few days, it's like we are following a 'gamble,' so we need to be careful of these short-term funds' strategies."
Fujito said that most long-term investors are waiting for trading cues such as an effective fiscal policy by the government or a drastic monetary policy action by the central bank.
Sources told Reuters that Bank of Japan officials are growing more receptive to stepping up monetary easing measures by buying more exchange-traded funds (ETF) invested in shares, as a stock market tumble and weak global growth threaten the country's fragile economic recovery.
Automakers were sold on profit-taking, with Toyota Motor Corp falling 1.0 percent and Nissan Motor Co shedding 1.8 percent.
Banks, which soared for the past few days, also languished. Mitsubishi UFJ Financial Group fell 1.0 percent and Mizuho Financial Group declined 2.0 percent.
Meanwhile, foreign investors turned net buyers of Japanese stocks last week for the first time in 14 weeks, according to data announced by Japan Exchange Group on Thursday.
Foreigners bought 32.66 billion yen of Japanese cash stocks on a net basis during the week, according to the data.
The broader Topix dropped 0.4 percent to 1,365.81 and the JPX-Nikkei Index 400 declined 0.4 percent to 12,354.88. (Editing by Simon Cameron-Moore)