TOKYO, Oct 13 (Reuters) - Japanese shares fell on Friday, tracking Wall Street's declines overnight after hotter-than-expected U.S. inflation data fuelled bets for a more hawkish Federal Reserve.

However, losses on Japan's benchmark Nikkei share average were limited by a 5.6% surge for heavily weighted Fast Retailing , the owner of the Uniqlo brand, following a strong earnings report.

Chip-related stocks also rose, supported by gains for U.S. peers against the grain of the broader Wall Street sell-off.

The Nikkei fell 0.42% to 32,356.76 by the midday recess, threatening to snap a three-day winning run.

The index was spared steeper losses by rallies for its most heavily weighted stocks, which also included chip-making equipment maker Tokyo Electron and chip-testing machinery manufacturer Advantest, which rose 1.2% and 0.5%, respectively.

Of the Nikkei's 225 components, only 20 were higher, with 203 falling and two flat.

The broader Topix index slumped 1.23%.

"Overall, stocks are being sold off," said Nomura Securities strategist Maki Sawada.

However, the run-up in Japanese equities this week and the approaching weekend are likely exacerbating declines, she said.

"It's an environment that's ripe for profit-taking," she said.

Even with the gains for Fast Retailing and chip stocks, every sector on the Nikkei was down, led by real estate.

Offsetting Fast Retailing's gains among retailers, Seven & i Holdings - the operator of the 7-Eleven convenience store chain in Japan - led losses among Nikkei constituents with a more than 5% slump after releasing its own financial results.

Although profit was in line with forecasts, "the lack of a buyback was a slight disappointment," Jefferies analyst Shunsuke Kuriyama wrote in a research note.

There were several noteworthy decliners among tech shares too. Online services companies Rakuten Group and Recruit Holdings fell 3.8% and 3.2%, respectively. Nintendo dropped 2.8%.

(Reporting by Kevin Buckland; Editing by Subhranshu Sahu)