(Updates with closing prices)

By Junko Fujita

TOKYO, Oct 23 (Reuters) - Japan's Nikkei share average

finished more than 1% lower on Thursday, as investors booked

profits from a rally driven by expectations for fiscal dove

Sanae Takaichi's new government.

The Nikkei declined 1.35% to 48,641.61 in its second

straight session of falls. The broader Topix edged down

0.39% to 3,253.78.

"Investors had scooped up stocks ahead of the parliamentary

vote to elect Takaichi as prime minister, and as soon as she was

elected, they started a selloff as all the good news was priced

in," said Kazuaki Shimada, chief strategist at IwaiCosmo

Securities.

Hardline conservative Takaichi was elected Japan's first

female prime minister on Tuesday, sending the Nikkei to a record

intraday high of 49,945.95 on that day.

Sentiment was also hurt by concerns over the U.S.-China

relationship after reports that the Trump administration was

considering curbs on exports to China made with U.S. software.

"The news on the U.S.-China issues became a trigger for the

selloff, but it was not a fundamental reason for today's

declines," Shimada said.

Technology investor SoftBank Group lost 4.66% to

become the biggest drag for the Nikkei. Chip-related Advantest ( ADTTF )

and Tokyo Electron ( TOELF ) lost 3.71% and 3.25%,

respectively.

Meanwhile, defence-related shares jumped, with Sumitomo

Heavy Industries ( SOHVF ) surging 11.26%. Kawasaki Heavy

Industries ( KWHIF ) and IHI rose 8.32% and 4.3%,

respectively.

The shares rose on expectations that Japan may propose to

boost defence spending as Takaichi and U.S. President Donald

Trump are scheduled to hold a meeting next week, Shimada said.

Of the more than 1,600 stocks trading on the Tokyo Stock

Exchange's prime market, 59% rose, 37% fell and 3% traded flat.

(Reporting by Junko Fujita; Editing by Subhranshu Sahu)