UPDATE 1-Foreign investors sold Japanese stocks every week in past 3 months

* Foreigners have been net sellers of Tokyo stocks for 13 weeks

* BlackRock downgrades Japanese equities to underweight in March

* BOJ’s buying offsets impact, lends support to market - analysts

SYDNEY, May 14 (Reuters) - Foreign investors sold a net 133.9 billion yen ($1.25 billion) of Tokyo shares last week, data from Japan Exchange Group showed on Thursday, marking the 13th consecutive week of selling, the longest on record.

Overseas players sold 120.6 billion yen of Japanese cash equities and 13.2 billion yen of futures in the holiday-shortened week of May 7-8. They have been net sellers since early February.

“The Japanese economy is disproportionately exposed to the global economy, which has been weighed down by the global slowdown due to the COVID-19 shutdown,” said Ben Powell, APAC chief investment strategist at BlackRock’s Investment Institute (BII).

“Japan is more advanced (in using) unorthodox monetary policies and therefore the marginal impact of the BOJ policies would be less than that of the Fed policies, which led us to tactically underweight Japan and have a preference for the U.S. and Asia ex-Japan,” said Powell.

BII downgraded Japanese equities to underweight from overweight in late March.

Year-to-date, foreigners have sold 7.69 trillion yen ($72 billion) of Japanese shares -- 3.57 trillion yen of cash equities and 4.12 trillion yen of futures.

“It’s mainly short-term investors that dumped Japanese stocks over the past few months,” said Makoto Sengoku, senior equity market analyst at Tokai Tokyo Securities.

“The noteworthy thing here is that in recent weeks, the Nikkei rose even as foreigners were selling shares. This is something new.”

Foreign players account for about 70% of trade flows in Japanese stocks and their stance has usually determined the course of the market.

Sengoku said an end to the lockdown in Japan, expected this month, could prompt foreign investors to buy back Japanese stock futures. “In the past, we have often seen a market rally after foreign investors have sold repeatedly.”

Stocks buying by the Bank of Japan (BOJ) as part of its stimulus programme was a main driver of the unusual strength in the Nikkei, analysts said.

“I cannot avoid an impression that it is a market artificially propped up by the BOJ. There are few investors who would want to buy the Nikkei above 20,500,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“When the total daily turnover has slipped to around 2 trillion yen, compared with 3-4 trillion yen before, a buying of 100 billion by the BOJ in the afternoon trade alone has a significant impact.”

The benchmark Nikkei closed at 19,914 on Thursday. ($1 = 106.8300 yen)

Reporting by Tomo Uetake, graphics by Gaurav Dogra, Editing by Hideyuki Sano and Catherine Evans