Japan's Nikkei slips on profit-taking after BOJ decision

(Updates at 0600 GMT)

TOKYO, Oct 31 (Reuters) - Japan's Nikkei share average index ended lower on Thursday as investors locked in profits after the Bank of Japan (BOJ) kept key rates unchanged.

The Nikkei fell 0.5% to close at 39,081.25. The index tracked overnight declines in U.S. equities to open 0.25% lower.

It fell more than 1% after the BOJ announced its policy. The broader Topix slipped 0.3% to 2,695.51.

The BOJ maintained ultra-low interest rates on Thursday and signalled the need to scrutinise global economic developments.

"Investors sold stocks to book profits after the big event was over," said Takamasa Ikeda, senior portfolio manager at GCI Asset Management.

"The Nikkei was a little bit overheated after a recent rally. The BOJ's decision was in line with expectations but it became a trigger for the sell-off."

The Nikkei rose to a two-week closing high on Wednesday.

Since peaking in July, it has been held hostage by a volatile yen, driven by expectations of a U.S. rate cut and a stronger dollar.

Still, the index has risen more than 17% this year.

Japan's markets have been hamstrung this week by political uncertainty after the ruling Liberal Democratic Party-led coalition lost its parliamentary majority in the weekend election.

The make-up of the future government is in flux and Prime Minister Shigeru Ishiba and the LDP may court smaller opposition parties that favour maintaining ultra-loose monetary policy and oppose plans to raise taxes.

Meanwhile, among stocks, Uniqlo-owner Fast Retailing (FRCOF) fell 2.21% and was the biggest drag on the Nikkei on the day.

Kyocera (KYOCF) tanked 10.42% after the smartphone maker cut its full-year operating profit forecast for fiscal year 2025.

Chip-testing equipment maker Advantest (ADTTF) jumped 6.43% on a profit forecast upgrade, but pared some of the early gains due to profit booking.

(Reporting by Junko Fujita; Editing by Alan Barona, Sherry Jacob-Phillips, Sumana Nandy and Sonia Cheema)