TOKYO, July 31 (Reuters) - Japan's Nikkei share average

gained in early trading on Thursday as market participants

focused on the Bank of Japan's policy statement due later in the

day for interest rate clues.

The Nikkei rose 0.5% to 40,842.88 by 0058 GMT. The

broader Topix gained 0.4%.

The BOJ is widely expected to keep interest rates steady at

0.5%, but investors will search for hints in the policy

statement and accompanying quarterly outlook report on when the

central bank is likely to resume rate hikes.

The central bank's decision does not come at a specified

time, but usually comes some time after 0200 GMT, with Governor

Kazuo Ueda giving a press conference from 0630 GMT.

Traders have firmed up bets for the BOJ to resume raising

rates from as early as October since Tokyo reached a

long-awaited trade agreement with Washington earlier this month,

removing a degree of uncertainty from the economic outlook.

"A hike by the end of the year is becoming more priced by

markets," Tapas Strickland, head of market economics at National

Australia Bank, said in a podcast.

"If that tentative trade deal with the U.S. holds, then that

should provide a little bit more confidence for the economy,

just given where inflationary pressures are at the moment."

On Thursday, shares of companies that benefit from a drop in

copper prices outperformed, with Fujikura ( FKURF ) and Furukawa

Elecric each rallying about 6%.

Earnings also lifted some stocks, with Kyocera ( KYOCF )

jumping 8.4%, while Nissan Motor ( NSANF ) rose more than 3%.

At the other end, Panasonic Holdings ( PCRFF ) slumped 3.5%,

and chip-testing equipment maker Advantest ( ADTTF ) lost 2.4%,

extending declines to a fourth straight session.

(Reporting by Kevin Buckland; Editing by Subhranshu Sahu)