Japanese shares climb close to this year's peak after Fed rate cut

* Nikkei, Topix get near to August peaks

* Fed easing supports sentiment on economy

* Profit-taking curbing rally in Japanese shares

By Hideyuki Sano

TOKYO, Sept 19 (Reuters) - Japanese shares rallied to close in on this year's peaks on Thursday, with domestic demand-led shares leading gains after a rate cut by the U.S. Federal Reserve helped boost risk sentiment.

The Nikkei share average .N225 rose as much as 1.34% to 22,255.56, edging near its year-to-date high of 22,362 hit in late August. It closed up 0.38% at 22,044.45.

The broader Topix .TOPX gained up to 1.24% to 1,626.52, coming within reach of its Aug. 17 peak of 1,633.96. It ended 0.56% higher at 1,615.66.

The market's gains were trimmed after the Bank of Japan kept its policy on hold, a widely expected decision but still disappointing some players who had bet the BOJ to act in-step with the Fed and the European Central Bank in easing.

The Fed cut interest rates for a second time this year, although it signalled further rate cuts are unlikely as the labour market remains strong. index players were taking profits as the indexes neared the peaks while other players were rebalancing into shares dependent on domestic demand.

Among them, Recruit Holdings 6098.T gained 3.1% while Mitsubishi Estate 8802.T rose 2.0%.

High-yielding power company shares were also bought after the U.S. interest rate cut.

Kansai Electric Power Co Inc 9503.T rose 2.7% and Chubu Electric Power 9502.T gained 1.7%.

Railway operators were also in favour. Keisei Electric Railway 9009.T closed at a near three-decade high, ending 1.6% higher. Odakyu Electric Railway 9007.T rose 2.4%.

Despite lingering worries about the U.S.-China trade war, hopes that the worst may be over soon are supporting the market, especially in the battered semi-conductor sector.

Advantest Corp 6857.T rose 1.5% and Shin-etsu Chemical 4063.T went up 0.6%.

Broader electronics makers also did well, with Fujitsu 6702.T rising as much as 3.3% to hit a 21-month high and Oki Electric 6703.T gaining 1.8%.

Still, while signs that Washington and Beijing are ready to resume their trade talks have helped to ease investor sentiment in recent weeks, many market players are not convinced how far the Nikkei's rally can continue.

"In the past, you were better off selling when the market has risen on hopes of a trade deal," said Naoya Oshikubo, senior manager of research at Sumitomo Mitsui Trust Asset Management.

Japan Tobacco 2914.T bucked Thursday's trend, falling 0.7% after India banned the sale of electronic cigarettes. by Richard Borsuk)