(Updates with closing levels)

TOKYO, May 22 (Reuters) - Japan's Nikkei share average

fell on Wednesday as investors awaited earnings from Nvidia ( NVDA ),

while domestic firms' cautious outlooks amid uncertainties about

rate and currency moves weighed on sentiment.

The Nikkei closed down 0.85% at 38,617.10, while the

broader Topix was 0.81% lower at 2,737.36.

"The whole world is awaiting the result of Nvidia ( NVDA ). The

outcome will affect global stocks, particularly the U.S.

equities, which will affect Japanese stocks," said Shuji Hosoi,

senior strategist at Daiwa Securities.

Nvidia ( NVDA ), Wall Street's third-largest firm by market

capitalization, will report results after the closing bell on

Wednesday in what is likely to be a significant market catalyst

and will test whether the outsized rally in AI-related stocks

can be sustained.

Heavyweight chip stocks, which helped the Nikkei scale a

record intraday high of 41,087.75 on March 22, sagged ahead of

the earnings.

Tokyo Electron ( TOELF ) declined 1.2% and Advantest ( ADTTF )

, which counts Nvidia ( NVDA ) among its customers, fell 0.8%.

The Nikkei has been hovering below 40,000 since the

beginning of April, partly because local companies' modest

earnings forecasts have weighed on sentiment, strategists said.

"Today's declines were bigger than expected. Investors,

particularly foreigners, might be selling Japanese stocks to buy

overseas stocks whose outlook is stronger," Hosoi said.

Markets are also bracing for further rate hikes by the Bank

of Japan this year. Bond yields have risen this month on hawkish

hints from the central bank as it seeks to contain the yen's

depreciation.

Of the Nikkei's 225 constituents, 176 fell, with index

heavyweight Fast Retailing ( FRCOF ) being the biggest drag on

the index with a 1.9% decline.

Among other stocks, Shin-Etsu Chemical ( SHECF ), which

manufactures chip silicon products among other things, stumbled

2.3%. Toyota Motor ( TM ) fell 1.4%.

On the other hand, SoftBank Group rose 2.4% to

become the biggest support for the Nikkei.

Kusuri No Aoki Holdings rose 1.6% after Hong

Kong-based activist fund Oasis Management raised its stake in

the drug store chain.

(Reporting by Junko Fujita; Additional reporting by Brigid

Riley; Editing by Janane Venkatraman and Varun H K)