* Semi-conductor sector leads losses * Weak U.S. durable goods orders hit risk sentiment * Market cautious on developments in Yemen; oil firms gain * Many investors remain optimistic over Japan’s economic outlook By Hideyuki Sano TOKYO, March 26 (Reuters) – Japan’s Nikkei share average dropped on Thursday as investors sold semi-conductor and other hi-tech shares after their U.S. peers were sold off sharply following soft U.S. economic data.

News that Saudi Arabia and Gulf Arab countries had launched military operations in Yemen to beat back Shi’ite militia forces also dampened the mood, although it benefited oil shares as oil prices rose.

The Nikkei fell 1.4 percent to 19,471.12, its biggest fall in 10 weeks, slipping from a 15-year high of 19.778.60 touched on Monday.

Among semi-conductor shares, Sumco fell 5.2 percent and Tokyo Electron 5.8 percent in reaction to the heavy losses in U.S. counterparts.

Other high-tech shares also fell, with Fujitsu shedding 3.1 percent and Sony dropping 3.3 percent.

The broader Topix fell 1.5 percent and the JPX-Nikkei Index 400 dropped 1.4 percent.

Sentiment was hurt by data showing spending on U.S. durable goods fell for the sixth straight month in February. Exports to the United States have been one of the brightest spots for the Japanese economy.

The military intervention in Yemen also hurt risk appetite, some market players said.

“It is becoming like a proxy war between Sunnis and Shi’ites so it is a source of concern … Given the weakness in U.S. share markets overnight, this might be used as a reason to sell shares,” said Norihiro Fujito, a senior investment analyst at Mitsubishi UFJ Morgan Stanley Securities.

Shippers fell 2.6 percent, the worst performance among the Tokyo Stock Exchange’s 33 industry subindexes, because of growing worries about the safety of sea routes near the Red Sea.

In contrast, oil company shares gained 1.0 percent as oil prices jumped more than 3 percent.

Some analysts noted signs that foreign speculators such as hedge funds were starting to sell Japanese shares, which have outperformed many markets this quarter.

“Those agile players are starting to take profits. That is a change you need to pay attention to. When they start to sell, they could sell 2-3 trillion yen and bring down the Nikkei by 2,000 points,” Fujito said.

On the whole, however, market players say the mood is resilient after an 11 percent gain in the Nikkei this quarter, which would be the biggest quarterly rise since late 2013 if sustained.

The market has been supported by hopes of buying from Japanese public investors, such as the Government Pension Investment Fund, which have been allocating more money to stocks under the auspices of Prime Minister Shinzo Abe.

Hopes that a rise in wages could boost long-dormant domestic consumption are underpinning the market.

“The big change is that until fairly recently, a lot of foreign investors were very sceptical about Abenomics and about the Japanese macroeconomic situation,” said Richard Dingemans, CEO at Pelargos Capital, based in The Hague, the Netherlands.

“But with a bit more lasting impact of Abenomics, and also the push from Abe-san himself for better corporate governance, increasing the returns of companies, companies are getting more profitable and that will also enable them to pay higher wages,” he said.

(Additional reporting by Tomo Uetake; Editing by Alan Raybould)