Reuters - Japan's Nikkei share average dropped on Tuesday morning as the seemingly intractable crisis in Ukraine and soft U.S. manufacturing activity weighed on sentiment, though gains in small-sized companies limited the losses.

The benchmark Nikkei shed 0.2 percent to 14,442.88, trading below its 200-day moving average of 14,509.71. It soared 1.8 percent on Monday.

Ukraine announced the evacuation of its troops from Crimea, essentially yielding the region to Russian forces, which seized a Ukrainian marine base.

U.S. President Barack Obama and major industrialised allies warned Russia on Monday it faces additional economic sanctions if President Vladimir Putin takes further action to destabilise
Ukraine following the seizure of Crimea.

"These geopolitical concerns do not directly have a big impact on trade in Japan, but investors are taking a defensive stance," a chief portfolio manager at a foreign asset management
firm. "They don't want to take large positions before the end of the fiscal year. They want to see how the next month's sales tax increase will affect the domestic economy as well."

Tokyo's scheduled hike to the nation's sales tax to 8 percent from 5 percent on April 1 has sparked worries that an expected chill in consumption could derail an ongoing economic
recovery.

In the United States, an industry survey showed U.S. manufacturing activity slowed in March.

Bellwether exporters were mixed, with Toyota Motor Corp rising 0.1 percent, Toshiba Corp shedding 1.6 percent, while Sony Corp falling 0.8 percent.

Some small-sized stocks had a better morning session. Yellow Hat Ltd, which sells automotive products, soared 4.6 percent after the company raised its dividend payment forecast
for the year ending March to 22 yen per share from 18 yen per share.

Mandom Corp gained 1.6 percent after the Nikkei reported that the cosmetics maker is expected to post an all-time-high operating profit for the current year through March, driven by increased sales of cosmetics in Southeast Asia and a weaker yen.

The broader Topix was flat at 1,163.32, while the JPX-Nikkei Index 400, an index comprised of companies with a high return on equity and robust corporate governance, shed 0.1 percent to 10,516.64.