(Updates prices)

By Brigid Riley and Mayu Sakoda

TOKYO, March 13 (Reuters) - Japan's Nikkei share average

fell for a third straight session on Wednesday as investors

assessed the likelihood of a policy shift at next week's Bank of

Japan (BOJ) meeting.

The Nikkei fell 0.26% to close at 38,695.97,

retreating after briefly surpassing the psychologically

significant 39,000 level.

The broader Topix ended 0.33% lower at 2,648.51.

Market players were trading with caution ahead of the BOJ's

policy meeting, with many expecting Japan's central bank to lift

short-term interest rates from negative territory either next

week or by April.

Chip-related shares tracked overnight Wall Street gains to

cap the losses, with Tokyo Electron ( TOELF ) and Advantest ( ADTTF )

rising 2.41% and 0.36%, respectively.

However, 137 of the index's 225 constituents declined, with

losses in major shares such as SoftBank Group, down

0.19%, and Uniqlo-brand clothing shop operator Fast Retailing ( FRCOF )

losing 0.69%.

Electrical equipment manufacturer Daikin Industries ( DKILF )

fell 2.64%.

The yen strengthened in the Asian morning, weighing on

exporters that benefit from a weaker currency, as traders

awaited the initial results of the closely watched spring wage

negotiations, due out on Friday.

Toyota Motors was down 0.89%.

"If a higher rate of wage increases than last year is

confirmed, views that the BOJ will exit from negative interest

rates at the March meeting will strengthen," said Maki Sawada, a

strategist at the investment content department of Nomura

Securities.

In that case, "the appreciation of the yen against other

currencies will likely weigh on stock prices," she added.

(Reporting by Brigid Riley; additional reporting by Mayu

Sakoda; Editing by Dhanya Ann Thoppil and Mrigank Dhaniwala)