* Strong Japanese earnings limit declines * Correction likely be short-term - fund manager By Ayai Tomisawa TOKYO, Aug 1 (Reuters) - Japan's Nikkei share average dropped on Friday morning after U.S. shares languished on concerns that interest rates could rise sooner than expected, but strong earnings from Sony Corp and Panasonic Corp limited the losses.

The Nikkei dropped 0.3 percent to 15,581.03 in mid-morning trade. For the week, the index looked set to gain 0.5 percent.

The U.S. S&P500 stock index posted its worst daily fall since April on worries that the Federal Reserve could raise interest rates sooner than some have expected after news that U.S. labour costs recorded their biggest gain in more than 5-1/2 years in the second quarter.

"The market is very sensitive about the direction of U.S. interest rates now," said Masashi Oda, chief investment officer at Sumitomo Mitsui Trust Bank. "The data triggered profit-taking since U.S. shares were at record highs and Japan shares were hitting multi-month highs recently. It will likely be a short-term correction." He added that Japanese corporate earnings for the April-June quarter have so far boosted expectations that companies have managed to weather the impact of a national sales tax hike enacted in April.

Sony jumped 6.5 percent to 1,887 yen, the highest since late April and was the third most-traded stock after its quarterly operating profit unexpectedly doubled, helped by a strong performance in its games and networks division.

Panasonic soared 3.1 percent to 1,296 yen, the highest since March 11 after it posted an 28 percent rise in operating profit for the first quarter, beating analyst expectations.

Other exporters lost ground on profit-taking, with Toyota Motor Corp shedding 0.6 percent and Honda Motor Co dropping 1.2 percent.

The broader Topix shed 0.4 percent to 1,284.70, and the JPX-Nikkei Index 400 declined 0.4 percent to 11,688.52.

(Editing by Eric Meijer)