TOKYO- Japan's Nikkei share average dropped more than 2% on Friday, retreating from the previous session's record high as tech stocks tracked their U.S. peers lower and the threat of currency intervention spurred profit-taking ahead of a long weekend.

The Nikkei slumped 2.45% to 41,190.68 at the close. The 1,033.34-point drop was the index's biggest decline this year.

Chip-making equipment giant Tokyo Electron was the biggest drag by index points, sliding 6.18%. Smaller peer Disco was the biggest decliner, down 8.77%.

That followed a 3.47% slide for the Philadelphia SE Semiconductor Index overnight.

Japan's broader, less tech-heavy Topix declined 1.18% on Friday.

Despite the sell-off, the Nikkei finished the week up about 0.7%, after surging to a record high of 42,426.77 on Thursday.

"A natural retreat following that strong three-day rally is the biggest factor behind today's move," Nomura Securities equities strategist Kazuo Kamitani said.

The stronger yen due to an overnight surge that many analysts, including Kamitani, attributed to likely Japanese currency intervention "was not really having an effect" on stock prices, he said.

At the same time, "it's natural to think there could be another round of intervention during the long weekend," spurring traders to square positions, Kamitani added.

Japanese financial markets are closed on Monday for a public holiday.

Meanwhile, a decline in domestic bond yields, precipitated by a steep drop in U.S. Treasury yields, weighed on the shares of financial institutions.

Insurers were the worst performers among the Tokyo Stock Exchange's 33 industry groups, down 4.11%, followed by electric machinery, off 2.69%. Banking sagged 1.79%.

Elsewhere, AI-focused startup investor SoftBank Group slid 4.4% after announcing the acquisition of chipmaker Graphcore.

Uniqlo store operator Fast Retailing dropped 4.85% and 7&i Holdings, the operator of 7-Eleven stores in Japan, lost 6.49%, both after disclosing financial results.

(Reporting by Kevin Buckland; Editing by Rashmi Aich and Subhranshu Sahu)