TOKYO, May 16 (Reuters) - Japan's Nikkei share average rose on Thursday as technology stocks tracked their overseas peers higher after U.S. consumer prices boosted market expectations for the Federal Reserve to cut rates in September.

The closely watched U.S. CPI report on Wednesday showed prices increased less than expected in April, suggesting that inflation resumed its downward trend.

That gave the green light to investors to keep buying, with Wall Street's three major indexes notching record closes overnight.

Positive sentiment continued in Asian hours, with the Nikkei up 0.74% at 38,669.57 by the midday break.

"The mood is one of relief," said Kyle Rodda, senior financial market analyst at Capital.com.

"If nothing else, (Wednesday's CPI) says a serious discussion about the need for further hikes has been taken off the table."

Technology shares pulled the bulk of the weight on Thursday, riding high on a boost from their U.S. peers after the S&P 500's rate-sensitive tech stocks led sector gains.

The yen's appreciation following U.S. CPI, however, weighed on export-related shares including index heavyweight Toyota Motor, down 2.4%, which tend to benefit from a softer yen.

Honda Motor and Suzuki Motor also dragged, declining 2.7% and 3.5%, respectively.

The broader Topix was down 0.26% at 2723.69.

Still, as the yen spiralled to its weakest in 34 years, the risk of currency intervention has kept investors on alert, and a rise in Japanese government yields has also weighed, said Capital.com's Rodda.

"With those risks diminishing, the Nikkei has the clear air it needs to renew its uptrend."

Among other individual stocks, chip-related shares Tokyo Electron, up 3.3%, and Advantest, rising 3%, added about 157 points to the Nikkei's near 284-point jump. AI-focused startup investor SoftBank Group gained 2%.

Meanwhile, shares of Recruit Holdings was up 6.6% on the staffing agency and publisher's upbeat revenue release.

Mitsubishi UFJ Financial Group fell 5.4%, despite posting a narrower-than-expected decline in fourth-quarter profit on Wednesday. The firm forecasted only a slight profit growth in the current financial year. (Reporting by Brigid Riley, Editing by Nivedita Bhattacharjee)