(Updates with closing prices)

By Junko Fujita

TOKYO, Sept 22 (Reuters) - Japan's Nikkei ended nearly

1% higher on Monday, rebounding after a volatile last session,

as concerns eased over the impact of the Bank of Japan's

decision to sell its holdings of riskier assets.

The Nikkei share average climbed 0.99% to 45,493.66,

while the broader Topix rose 0.49% to 3,163.17.

The BOJ said on Friday that it would sell its holdings of

exchange-traded funds (ETFs) at an annual pace of around 330

billion yen ($2.23 billion), another move to phase out its

massive monetary stimulus.

The Nikkei reversed its gains after the BOJ's announcement

on Friday to fall as much as 2%. It ended the session 0.57%

lower.

"Investors overreacted to the BOJ's announcement. And today,

the market is rebounding," said Seiichi Suzuki, chief equity

market analyst at Tokai Tokyo Intelligence Laboratory.

The pace of BOJ sale of ETFs is slow, and the market just

wondered why it turned so bearish on Friday, he said.

Japanese equities were also underpinned by Wall Street's

strength and optimism about new domestic policies, said Hiroyuki

Ueno, chief strategist at Sumitomo Mitsui Asset Management.

As the race for the Liberal Democratic Party leadership has

started, the market is optimistic about economic measures to be

undertaken by whoever becomes the new leader, said Ueno.

The next LDP leader is likely to become the country's new

prime minister as the party is by far the largest in the lower

house of parliament.

The party lost its majorities in both houses under former

prime minister Shigeru Ishiba, so the path is not guaranteed.

On Monday, chip-related shares rose to provide the biggest

boost to the Nikkei, with Advantest ( ADTTF ) and Tokyo Electron ( TOELF )

up 3.2% and 3.87%, respectively.

Technology investor SoftBank Group lost 2.42% to

become the biggest drag for the Nikkei. Chugai Pharmaceutical ( CHGCF )

slipped 2.08%.

($1 = 148.2100 yen)

(Reporting by Junko Fujita; Editing by Harikrishnan Nair and

Subhranshu Sahu)