TOKYO, June 13 (Reuters) - Japan's Nikkei share average

surrendered early gains to trade lower on Thursday ahead of the

Bank of Japan's policy decision due Friday.

The Nikkei was down 0.12% to 38,831.36 by the midday

break, after rising nearly 1% to cross the 39,000 level earlier

in the session as chip-related stocks tracked their U.S. peers.

The broader Topix also reversed gains to fall 0.62%

to 2,738,73.

"The market was weaker than expected," said Shuji Hosoi,

senior strategist at Daiwa Securities.

"The Nikkei was barely in the positive territory earlier in

the session supported by gains of chip-related stocks."

Shares of chip-testing equipment maker Advantest rose 2.39%

to track the U.S. semiconductor index's 2.9% gain

overnight. Advantest was the biggest support for the Nikkei.

On the contrary, chip-making equipment maker Tokyo Electron ( TOELF )

gave up early gains to 0.87%, dragging the Nikkei the

most.

Toyota Motor ( TM ) lost 1.87% and was the biggest drag

for the Topix.

Trading firm Mitsubishi Corp ( MSBHF ) slipped 2.76%.

The BOJ will conclude its two-day policy meeting on Friday,

where it is expected to keep interest rates steady and consider

whether to offer clearer guidance on how it plans to reduce its

huge balance sheet.

"The market has already taken into account that the BOJ will

reduce the bond buying amounts, so the market reaction after the

policy meeting is expected to be limited," said Daiwa's Hosoi.

The BOJ will consider will consider trimming its bond buying

at the meeting ending on Friday, the Nikkei newspaper reported,

taking a first key step to reducing its almost $5 trillion

balance sheet.

Of the 225 Nikkei components, 45 stocks rose and 179 fell,

while one was flat.