(Updates with closing prices)

By Kevin Buckland

TOKYO, May 24 (Reuters) - Japan's Nikkei share average

sank on Friday, tracking declines on Wall Street after robust

U.S. economic data stoked bets that stubborn inflation may delay

Federal Reserve interest rate cuts.

The Nikkei sagged 1.17% to 38,646.11 as of the

close, and had earlier dipped as much as 1.9%.

The broader Topix dropped 0.44%.

All three main U.S. equity indexes declined overnight, led

by a 1.5% slump for the Dow, after U.S. manufacturers

reported a surge in prices for a range of inputs, suggesting

that goods inflation could pick up in the months ahead.

The benchmark U.S. 10-year bond yield climbed to

a more than one-week peak of 4.498% as traders pared back bets

to a likely single quarter-point rate reduction this year, from

a consensus for two cuts previously.

"It definitely seems, at least in the short term, that moves

in Japanese stock prices are in the hands of U.S. yield levels,"

Kazuo Kamitani, an equities strategist at Nomura Securities

said.

While the Nikkei was firmly down on the day, the strategist

pointed to support from 25-day moving average at around 38,300

as holding firm. And with the indicator turning slightly upward

as of the close of Friday's trading, "the Nikkei could

potentially hold at current levels or even flip to gains from

next week", he said.

For the week, the Nikkei has lost 0.36%, but remains up more

than 15% this year, keeping it squarely among the top performing

markets globally.

It rose to an all-time high of 41,087.75 on March 22 before

pulling back over the following month to as low as 36,733.06.

On Friday, chip stocks that had rallied the previous day on

the back of Nvidia ( NVDA ) earnings retreated sharply to be

among the Nikkei's worst performers.

Advantest ( ADTTF ) dropped 4.5%, Tokyo Electron ( TOELF )

fell 2.8% and Lasertec ( LSRCF ) sank 4.5%.

(Reporting by Kevin Buckland; Editing by Mrigank Dhaniwala)