By Kevin Buckland

TOKYO Japan's Nikkei 225 share average will drop 4% from 33-year highs, returning to the psychologically key 30,000 level by year-end and trading around the same level in mid-2024, according to the median estimates of analysts polled by Reuters.

Responses varied widely, however, revealing a deep split over the outlook for a benchmark index that had until Tuesday confounded calls for a pause in its breathless ascent to a post-bubble era peak.

The first signs of frailty emerged in the afternoon session, when it plunged as much as 1.67% from the August 1990 high of 31,352.53 hit in the morning, before ending the day down 0.42% at 30,957.77 to snap an eight-day winning streak.

Forecasts for year-end from 15 analysts in the survey ranged from 35,000 at the top end - a level not seen since February 1990 - to 26,000 at the bottom - where the Nikkei started 2023.

Four respondents set a target of precisely 30,000, indicating a 3.1% fall from Tuesday's close.

The range was also wide for the ten mid-2024 forecasts, spanning 25,000 to 35,100, with two calls at exactly 30,000.

There was little consensus over the Nikkei's path in the coming three months, with four analysts expecting narrow range-bound trading, two favouring rallies of 10% or more, and two seeing a 10% correction as the most likely outcome.

Bulls tended to cite the Tokyo Stock Exchange's push for stronger corporate governance, which has been a key factor in attracting the foreign investors who have largely driven the Nikkei's rally. The outlook for continued ultra-easy monetary policy from the Bank of Japan was also highlighted.

"Foreign investors are really snapping up Japanese shares at the moment, so the trend higher for the Nikkei is likely to continue," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, which predicts a rise to 33,500 by year-end and 35,100 by mid-2024.

Bulls and bears alike indicated the importance of corporate earnings, after a particularly strong reporting season allowed the Nikkei to step out of a rut in late April.

Because so many of the Nikkei's constituents are exporters, China's sputtering post-lockdown recovery was cited as a key risk.

"Analyst consensus for the corporate outlook may be cut toward mid-year as China's economy has weakened," said Yunosuke Ikeda, chief equity strategist at Nomura Securities, who forecasts the Nikkei will decline to 30,000 at year-end.

"Japanese companies might not have factored China's downturn into their outlook."

(Other stories from the Reuters Q2 global stock markets poll package:)

(Writing by Kevin Buckland; Reporting by Tokyo markets team; Editing by Kirsten Donovan)