Nikkei gives up gains as caution kicks in before U.S. payrolls

TOKYO, Jan 7 (Reuters) - The Nikkei share average sank into the midday break on Friday, giving up strong early gains, as the mood turned cautious ahead of a key U.S. jobs report and a three-day weekend in Japan.

The Nikkei (.N225) lost 0.33% to 28,395.24, while the broader Topix (.TOPX) dropped 0.41%.

Semiconductor stocks, which were among the leading gainers at the open, dragged on the indexes, with Advantest sliding 0.65% and Tokyo Electron (8035.T) slipping 0.12%.

Uniqlo store operator Fast Retailing (9983.T) declined 1.46%, surrendering an early advance. Sony (6758.T) shed 0.45%.

"With the three-day weekend coming up, after an initial round of buying, selling to close out positions has come to dominate trading," said a market participant at a domestic securities firm. "There isn't any strong reason to buy stocks today, after U.S. stocks traded sideways overnight."

The S&P 500 (.SPX) ended 0.1% lower on Thursday, ahead of the U.S. non-farm payrolls due later on Friday, which could strengthen Federal Reserve officials' resolve for an early and speedy pace of monetary policy normalization.

Expectations for three quarter-point U.S. rate increases this year have driven Treasury yields to multi-month highs.

That lifted shares of banks and other financial institutions in Japan. Mitsubishi UFJ Financial Group (8306.T) jumped 3.67%.

Energy shares also rose, supported by higher crude oil prices.

SoftBank Group (9984.T) was the Nikkei's biggest winner by index points, with a 1.86% rally.

The Topix value-share index (.TOPXV) rose 0.18%, compared with a 1.0% slide in the growth-share index (.TOPXG).

Reporting by Tokyo markets team; editing by Uttaresh.V

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