TOKYO, July 10 (Reuters) - Japan's Nikkei share gauge

slipped on Thursday, stalling ahead of the key 40,000 level, as

trade frictions and an upcoming election weighed on investor

sentiment.

The Nikkei 225 Index lost 0.6% to 39,584.11 after

two days of gains. The broader Topix shed 0.8%.

Retailer Aeon plunged 3.5% after postponing its

earnings announcement due to the discovery of inappropriate

accounting practices at a Vietnamese subsidiary.

Chip-maker supplier Disco led gains with a 4.3%

surge after it raised its first-quarter earnings forecast,

citing strong demand related to artificial intelligence.

Earlier this week, U.S. President Donald Trump announced 25%

tariffs on Japan and other trade partners starting August 1, a

date he said was final.

Export-dependent Japan remains an outlier among the U.S.'s

key trading partners, with multiple rounds of trade talks

failing to produce a breakthrough.

Meanwhile, Japanese policymakers are increasingly

focused on a critical upcoming election on July 20.

"The Nikkei has been struggling to move higher ahead of the

40,000 mark," said Wataru Akiyama, a strategist at Nomura

Securities.

"The stock market may be taking a wait-and-see attitude

given the lack of progress in the Japan-U.S. tariff negotiations

and the upper house election."

Japan is seeking talks between its tariff negotiator, Ryosei

Akazawa, and U.S. Treasury Secretary Scott Bessent during the

latter's visit to Japan for the World Expo next week, the

Yomiuri newspaper reported, citing Japanese government sources.

There were 40 advancers on the Nikkei against 180 decliners.

The biggest losers by percentage were Nikon ( NINOF ), down

4.68%, followed by Tokyo Electric, which slid 3.9%.

The biggest percentage gainers were Disco, followed by

Rakuten Group ( RKUNF ), which rose 4%.