TOKYO, June 23 (Reuters) - Japan's Nikkei share average erased early gains to drop more than 1% on Friday, as investors booked profits ahead of an expected rush in sell-off at the end of the month for portfolio rebalancing.

The Nikkei index lost 1.63% to 32,722.33 by the midday break, after rising as much as 0.8% earlier. The index is down 2.8% for the week and on track for its first weekly loss after 10 straight weeks of gains.

The broader Topix slipped 1.5% to 2,262.13.

"Investors bought shares initially after the market fell sharply in the previous session," said Shigetoshi Kamada, general manager at the research department at Tachibana Securities.

"But they became cautions about possible sell-offs toward the end of the month, as pension funds try to rebalance their portfolios. Selling power outweighed buying force."

Uniqlo brand owner Fast Retailing fell 2.49% and was the biggest drag to the Nikkei. Technology investor SoftBank Group lost 2.71% and silicon wafer maker Shin-Etsu Chemical dropped 2.37%.

Trading firms lost 3.35% to become the worst-hit sector among the Tokyo Stock Exchange's 33 industry sub-indexes.

The index gained nearly 19% this month after billionaire Warren Buffett raised his stakes in the sector.

Mitsubishi Corp lost 4.15%, Marubeni slipped 3.49% and Itochu lost 3.69%.

Utilities rose 0.73% to become the only sector in positive territory, with Tokyo Electric Power Holdings jumping 5.65% to become the top gainer on the Nikkei.

Drugmaker Eisai rose 1.48% and sake brewer Takara Holdings advanced 1.85%.

Of the 225 Nikkei components, 15 stocks rose, while 209 fell, with one trading flat. (Reporting by Junko Fujita; Editing by Rashmi Aich)