(Updates with closing prices)

By Kevin Buckland

TOKYO, May 28 (Reuters) - Japan's Nikkei share average

edged lower on Tuesday as investors weighed the likely timing of

further Bank of Japan policy tightening, while chip-related

stocks retreated after last week's gains.

The Nikkei slipped 0.11% to 38,855.37 as of the

close, although winners and losers were balanced, with 120

stocks rising versus 101 that fell, with four flat.

The broader Topix declined 0.08%, with an index of

growth shares sliding 0.37%, while value shares added

0.50%.

Nomura Securities strategist Maki Sawada said that

considering the yen and domestic bond yields were little changed

in the latest session, and U.S. markets were shut for a holiday

on Monday, "in an environment like this, movements in the Nikkei

are likely to be blunted."

The BOJ's next policy-setting gathering is scheduled for

June 13-14, and investors are wary of a hawkish outcome as a

weakening currency has seen officials including Governor Kazuo

Ueda take more hawkish stances.

Banking shares continued their rally on the prospect of

higher interest rates buoying profits from lending and

investing. The Topix banking index added 1.47% to reach the

highest since December 2007.

Utilities were another bright spot, led by Furukawa

Electric's ( FUWAF ) jump of more than 9%. Kansai Electric

advanced 5.50%.

At the other end, chip-sector shares, which rose after

Nvidia's bullish earnings last week, took a step back.

Chip-testing equipment manufacturer Lasertec ( LSRCF ) was

both the biggest points drag on the Nikkei and the biggest

percentage decliner with a 3.19% slide. Peer Advantest ( ADTTF ),

which counts Nvidia as a customer, declined 0.92%.