(Updates with levels as of midday close)

By Brigid Riley

TOKYO, Aug 14 (Reuters) - Japan's Nikkei share average

edged down by the midday close on Wednesday, reversing early

gains as profit-taking and yen appreciation weighed on the

market.

The Nikkei was down 0.2% at 36,155.26 at the midday

break after rallying more than 1% after local media reported

Japan's prime minister Fumio Kishida will step down as ruling

party leader in September.

The broader Topix was up 0.5% at 2,565.42.

Kishida later confirmed reports in a televised press

conference on Wednesday.

Analysts said Kishida's decision to step down could add

some uncertainty, although the impact should be limited.

"His low approval ratings mean a significant negative

reaction from equities may be avoided," said Charu Chanana,

global market strategist and head of FX strategy at Saxo.

The stock market had earlier gotten a boost after U.S.

producer prices increased less than expected in July, buoying

bets for the Federal Reserve to cut interest rates in September

and sending Wall Street higher overnight.

Japan's technology shares had tracked their U.S. peers

higher, with heavyweights like artificial intelligence-focused

startup investor SoftBank Group and chip-testing

equipment maker Advantest ( ADTTF ) rising to give the Nikkei a

sizeable lift.

But those gains narrowed as investors locked in profits, and

the yen strengthened during trade to weigh on export-related

shares.

Market players also awaited U.S. consumer prices data due

later on Wednesday for further confirmation of cooling inflation

in the world's largest economy.

But retail sales and labour-related data scheduled for later

in the week remain key, Saxo's Charu Chanana said.

"Markets still remain on edge about a potential U.S.

recession and any signs of consumer strain could buoy the yen

and bring another pullback in Japanese equities."

Financials led the gains by sector, with insurance firms

up 2.6%. Banks rose more than 1%.

Among individual shares, automakers Toyota Motor ( TM )

and Honda Motor ( HMC ) were up 2.3% and 2.8%, respectively,

coming off earlier highs.

Chip-making equipment giant Tokyo Electron ( TOELF ),

down 2.4%, and Uniqlo parent firm Fast Retailing ( FRCOF ),

losing 0.9%, became the biggest drag on the index.

(Reporting by Brigid Riley; Editing by Subhranshu Sahu and

Mrigank Dhaniwala)