TOKYO, Aug 3 (Reuters) - Japanese shares fell for a second straight day on Thursday, tracking the overnight drop on Wall Street, as investor sentiment was hurt by rising yields in the United States and Japan.

The Nikkei index lost 1.68% to close at 32,159.28, after losing 2.3% in its biggest one-day drop in the previous session.

The broader Topix lost 1.45% to 2,268.35.

"I take the declines as an adjustment to the benchmark after its sharp gains until Thursday," said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Research Institute.

The Nikkei had risen about 5% until Thursday from its lowest in July.

"Investors were also worried about rising Japanese yields. They did not rise as much on the day when the Bank of Japan announced the policy tweak, but they do rise when yields on U.S. Treasury rise," said Seiichi Suzuki.

Japan's 10-year government yield hit a more-than-nine-year high after U.S. 10-year yields rose overnight, prompting the Bank of Japan to conduct emergency bond buying.

The yen extended its declines after the BOJ's announcement, falling to a four-week low of 143.89 per dollar, which limited the Nikkei's losses.

Wall Street finished lower overnight, with the S&P 500 and Nasdaq down for a second straight day as investors took profits on five months of gains, a day after rating agency Fitch cut the U.S. government's credit rating.

Among individual stocks, TDK tanked 10.23% after the sensor maker cut its full-year outlook.

Yamaha Corp lost 14.57% as the musical instruments maker lowered its annual profit forecast.

Bucking the trend, Kawasaki Kisen rose 4.05% after the shipping firm, whose shareholders include an activist investment fund, made an announcement of share buyback in the previous session.

Its peer Nippon Yusen surged 7.24%, to the top of the Nikkei, after announcing a share buyback worth 16.7% of its outstanding shares on Thursday. (Reporting by Junko Fujita; Editing by Rashmi Aich and Savio D'Souza)