(Updates with closing prices)

By Junko Fujita

TOKYO, July 23 (Reuters) - Japan's Nikkei share average

ended higher on Thursday, as chip-related stocks tracked U.S.

peers higher overnight, though prospects for an early rate hike

from the Bank of Japan limited gains.

The Nikkei rose 0.46% to 66,422.6, while the broader

Topix gained 0.51% to 4,053.88.

Overnight, the Philadelphia SE Semiconductor index, a

reference for the Nikkei, rose 0.4%. Alphabet said

that it expects to spend between $195 billion and $205 billion

in capital expenditures, compared with the earlier plan of $180

billion to $190 billion this year.

"Sentiment improved after Alphabet raised its outlook for

investments, and U.S. chip stocks inched up," said Shuutarou

Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

"On the other hand, bets that the BOJ may raise interest

rates early hurt sentiment. Until now, the central bank tried to

support the economy while raising rates, but that stance may

change, which is negative for stocks led by domestic demand."

In Japan, AI and chip-related shares advanced, with

Advantest ( ADTTF ) jumping 4.11%. Technology investor SoftBank

Group rose 3.77%.

Memory chip maker Kioxia ( KXHCF ) reversed early gains to

end 3.72% lower. Chip-making equipment maker Tokyo Electron ( TOELF )

also erased gains to end 0.02% lower.

Bank shares rose along withJapanese government bond yields,

which rose on bets of an early rate hike.

Mizuho Financial Group ( MFG ) rose 2.78%. Sumitomo Mitsui

Financial Group ( SMFG ) and Mitsubishi UFJ Financial Group ( MUFG )

climbed more than 2% each.

Shares of retailers, which rely on domestic demand, fell,

with Takashimaya ( TKSHF ) dropping 6.14% to become the biggest

percentage loser on the Nikkei. Isetan Mitsukoshi Holdings ( IMHDF )

fell 4.65%.

Of some 1,500 stocks trading on the Tokyo Stock Exchange's

prime market, 44% rose, 53% fell and 2% traded flat.