(Updates with closing prices)

By Junko Fujita

TOKYO, July 28 (Reuters) - Japan's Nikkei share reversed

course to end lower on Monday, as investors locked in profits

following a recent rally and shifted their focus to domestic

corporate earnings.

The Nikkei dropped 1.1% to close at 40,998.27, after rising

as much as 0.2% earlier in the session.

The broader Topix slipped 0.72% to 2,930.73.

"Investors sold stocks to book profits from a recent rally;

that's a short answer to today's declines," said Seiichi Suzuki,

chief equity market analyst at Tokai Tokyo Intelligence

Laboratory.

"But they sold stocks because the shares jumped last week,

and were concerned that corporate earnings may not justify the

current level of the equities."

Last week, the Nikkei climbed to a one-year high after Japan

and the United States struck a deal to lower the hefty tariffs

U.S. President Donald Trump threatened to impose on goods from

Japan.

Chip-related shares led the declines, with Advantest ( ADTTF )

tanking 8.96% to become the biggest drag in the Nikkei.

Screen Holdings ( DINRF ) lost 9.74% to become the top

percentage loser in the Nikkei, after the chip-making equipment

maker reported a 12.2% decline in its latest quarterly operating

profit.

The banking sector fell 2.86% to become the worst

performer among the Tokyo Stock Exchange's 33 industry

sub-indexes.

Bucking the trend, Fanuc jumped 5% to become the top

percentage gainer in the Nikkei, after the robot maker's latest

quarterly operating profit jumped nearly 30%. The company also

said that its forecast factored in the 15% U.S. tariff set to

take effect on August 1.

Of the more than 1,600 stocks trading on the TSE's prime

section, 42% rose and 52% fell, with 4% trading flat.