(Updates at 0219 GMT)

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

traded lower on Thursday, tracking an overnight drop in the U.S.

markets, while traders awaited the conclusion of the Bank of

Japan's policy meeting due later in the day.

The Nikkei was down 0.4% at 39,134.95, as of 0219

GMT, while the broader Topix slipped 0.41% to 2,692.88.

"The Nikkei tracked the overnight declines of U.S. equities,

but the Nikkei has also retreated from gains in the previous

session, which was too strong," said Shigetoshi Kamada, general

manager at the research department at Tachibana Securities.

Japan's Nikkei share average rose to a two-week closing high

on Wednesday.

The Nikkei peaked in July, and has since been hostage to

a volatile yen, driven by U.S. Federal Reserve rate

expectations and the dollar. The currency is still up more than

17% this year.

Japan's markets have been hamstrung this week by

political uncertainty after the ruling Liberal Democratic

Party-led coalition lost its parliamentary majority in the

weekend election.

The make-up of Japan's future government is in flux and

may see Prime Minister Shigeru Ishiba and the LDP court smaller

opposition parties, that favour maintaining ultra-loose monetary

policy and oppose plans to raise taxes.

The Bank of Japan is expected to maintain ultra-low interest

rates on Thursday and signal a cautious approach to rolling back

its massive monetary stimulus, as political uncertainty and

jittery markets cloud the outlook.

Uniqlo-brand owner Fast Retailing ( FRCOF ) fell 1.5 % to

drag the Nikkei the most.

Shares of Kyocera ( KYOCF ) tanked 11.1% after the ceramics

maker cut its annual operating profit forecast.

Advantest ( ADTTF ) jumped 7% as the chip-testing equipment

maker raised its annual operating profit forecast.