TOKYO, July 29 (Reuters) - Japan's Nikkei share average

fell for a third straight session on Tuesday, as concerns over

the domestic corporate outlook led investors to lock in profits

from a recent rally.

The Nikkei was down 0.7% at 40,728.48, as of 0151

GMT. The broader Topix declined 0.75% to 2,908.75.

In the middle of the earnings season in Japan, investors are

cautious about the corporate outlook, which may be hit by a 15%

tariff to be imposed on Japan's exports to the United States,

said Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust

Asset Management.

Last week, Japan struck a trade deal that lowers the hefty

tariffs U.S. President Donald Trump had threatened to impose on

goods from Japan. That sent the Nikkei to its highest level in a

year last week, but the gain was too much, said Ueno.

"Half of its gains came from expectations that Prime

Minister (Shigeru) Ishiba would step down, and the market hoped

someone who promotes measures to stimulate the economy would

replace him," he said.

Ishiba vowed to remain in his post after his ruling

coalition suffered a bruising defeat in upper house elections,

prompting some in his own party to doubt his leadership as the

opposition weighed a no-confidence motion.

On Tuesday, chip-related stocks led the decline, with

Lasertec ( LSRCF ) falling 5% to become the worst performer on

the Nikkei.

Tokyo Electron ( TOELF ) and Advantest ( ADTTF ) slipped 0.49%

and 0.33%, respectively.

Nitto Denko ( NDEKF ) fell 4.6% after the industrial

materials maker posted a 16% decline in quarterly operating

profit.

All but three of the Tokyo Stock Exchange's 33 industry

sub-indexes fell. The auto sector lost 1.7% to become

the worst performer.

Bucking the trend, Nomura Research jumped 8.9%

after the consulting and IT solutions provider reported a 17%

rise in quarterly net profit.