(Updates with closing prices)

TOKYO, Jan 9 (Reuters) - Japan's Nikkei share average

closed lower on Thursday as investors sold stocks to book

profits after a recent rally, with chip-related shares dragging

on the index the most.

The Nikkei fell 0.94% to close at 39,605.09, while

the broader Topix slipped 1.23% to 2,735.92.

"The Nikkei has risen to a level that prompted investors to

sell stocks to secure profits," said Masahiro Ichikawa, chief

market strategist at Sumitomo Mitsui DS Asset Management.

"Investors need new market moving-cues to believe that the

Nikkei will rise further and that would be the domestic

corporate outlook."

The Nikkei crossed 40,000 to hit a five-month high of

40,398.23 on Dec. 27, 2024, but has failed to breach that level

since then.

Chip-related stocks led the declines on the day, with Tokyo

Electron ( TOELF ) and Advantest ( ADTTF ) falling 1.83% and 2%,

respectively.

Toyota Motor ( TM ) fell 2.21% to drag the Topix the most.

"With the U.S. markets being closed later in the day,

investors were cautious and the index was hovering near the

bottom end of the recent trading range," said Takehiko Masuzawa,

trading head at Phillip Securities Japan.

U.S. stock markets will be closed on Thursday for a national

day of mourning to mark the death of former President Jimmy

Carter.

All but three of the Tokyo Stock Exchange's 33 industry

sub-indexes fell, with the shipping sector losing

4.9% to become the worst performer.

The union representing 45,000 dock workers on the U.S.

East and Gulf Coasts and their employers reached a tentative

deal on a new six-year contract, averting a strike that could

have raised shipping freight fees.

Kawasaki Kisen, Nippon Yusen and Mitsui

OSK Lines fell more than 5% each.

Of the more than 1,600 stocks trading on the TSE's prime

market, 20% rose, 77% fell and 2% traded flat.