(Updates with closing prices)

By Kevin Buckland

TOKYO, Sept 3 (Reuters) - Japan's Nikkei share average

edged lower on Tuesday as a firmer yen weighed on investor

sentiment, although banks provided a bright spot amid higher

bond yields at home and abroad.

The Nikkei ended the day down 0.04% at 38,686.31,

giving up early gains as the yen changed course to strengthen as

much as 0.5% against the dollar from a two-week low

hit earlier in the session.

The broader Topix, with its lower proportion of tech

companies and other exporters, advanced 0.64%. A sub-index of

value shares rallied 0.91%, outperforming a 0.35% rise

in growth shares.

At the same time, an air of caution prevailed over the

market ahead of a parade of key U.S. economic data this week,

particularly monthly non-farm payroll figures due Friday.

"The overarching theme in the market continues to be the

outlook for monetary policy in Japan and the United States,"

said Maki Sawada, an equities strategist at Nomura Securities.

"Depending on the result of the jobs report, there is

the potential for the market to swing sharply."

Banks and insurers and were the

top performers among the Tokyo Stock Exchange's 33 industry

groups, jumping 3% and 2.5% respectively. Lender Resona Holdings ( RSNHF )

was the Nikkei's biggest percentage gainer, with a 6.6%

surge.

Long-term Japanese government bond yields

rose to the highest in about a month, while equivalent U.S.

Treasury yields also gained after a holiday on

Monday. Higher long-term yields boost revenue from investing and

lending.

Meanwhile, semiconductor-related shares sank, with

chip-testing equipment manufacturer Advantest ( ADTTF ) slumping

2.25% after starting the day with gains of as much as 3.43%.

Chip-making machinery giant Tokyo Electron ( TOELF ) eased 1.49%.

Other exporters were mixed, with Toyota Motor ( TM )

losing 0.32% but Nissan ( NSANF ) adding 0.42%. Shares of Sony

Group ( SONY ) appreciated 0.64%.

(Reporting by Kevin Buckland; Editing by Sherry Jacob-Phillips

and Varun H K)