(Updates at 0630 GMT)

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

ended lower on Wednesday as investors sold stocks in the

backdrop of the benchmark hovering near the key level of 40,000

points, while Seven & i Holdings ( SVNDF ) surged on a potential

management buyout, capping some losses.

The Nikkei fell 1.66% to close at 38,721.66, while

the broader Topix slipped 1.21% to 2,708.42.

Wall Street's three major indexes closed lower on Tuesday,

as investors booked some profits from a post-election rally and

waited anxiously for U.S. inflation data due this week.

"Investors were not convinced that the Nikkei would hit

40,000 again anytime soon, so they sold stocks as the index

neared that level," said Fumio Matsumoto, chief strategist at

Okasan Securities.

"For the index to rise further, we need to see more appetite

from foreigners."

Last week, the Nikkei hit its highest level since Oct.

15 and posted its biggest weekly gain since September. The

benchmark had crossed the 40,000 mark on Oct. 15, touching an

intraday high of 40,257.34.

On Wednesday, Uniqlo-brand owner Fast Retailing ( FRCOF )

slipped 1.96% to drag the Nikkei the most.

SoftBank Group gave up its early gains to close

2.89% lower.

Game maker Nexon ( NEXOF ) tanked 17.45% to become the top

percentage loser on the Nikkei after cutting its annual net

profit forecast for the year to December.

Seven & i Holdings ( SVNDF ) jumped 11.78% to become the

biggest support for the Nikkei.

The convenience store operator said on Wednesday it received

a buyout proposal from a member of its founding Ito family,

following a report that the 7-Eleven owner was considering a

management buyout offer worth up to $58 billion.

Tokyo Electron ( TOELF ) rose 0.88% as the chip-making

equipment maker raised its annual operating profit forecast by

8.5%.

Sharp surged 12.84% to become the top gainer on the

Nikkei after the mobile phone maker more than quadrupled its

half-yearly net profit.

($1 = 154.6800 yen)