TOKYO, Dec 17 (Reuters) - Japanese shares fell on Friday to erase most gains made in the previous session, as investors turned cautious about rate increase after the U.S. and British central banks took hawkish steps, while fears over the Omicron coronavirus variant hit travel-related stocks.

The Nikkei share average lost 1.79% to close at 28,545.68, after rising more than 2% on Thursday. The index edged up 0.38% for the week.

The broader Topix lost 1.42% to 1,984.47 but posted a 0.46% gain.

"Today's decline is a natural reaction to the Fed's monetary tightening. The market jumped yesterday because those who had shorted Japanese shares bought back stocks," said Tomoichiro Kubota, senior market analyst at Matsui Securities.

"Towards the end of the year, investors will remain largely cautious about the monetary tightening."

On Wednesday, the Fed said it would accelerate a tapering of its bond-buying stimulus to end the program in March, setting up three quarter-point rate increases next year.

The Bank of England overnight also surprised markets by becoming the first major global central bank to raise interest rates.

In Japan, technology shares tracked sharp overnight losses in U.S. peers on Nasdaq, with chip-related Tokyo Electron leading Nikkei declines, losing 3.18%.

Air-conditioning maker Daikin Industries fell 2.59% and technology investor SoftBank Group 2.87%.

Travel-related shares were hit after a report on the first case of a domestically-acquired Omicron infection.

Airlines and railways lost 1.26% and 1.49%, respectively. Oriental Land, the operator of the Tokyo Disney Resort, lost 4.4%.

(Editing by Rashmi Aich)