(Updates with closing prices)

By Kevin Buckland

TOKYO, July 31 (Reuters) - Japan's Nikkei share average

gained on Thursday as the Bank of Japan kept interest rates

steady as was widely expected, while revising up inflation

forecasts.

That signalled the central bank's conviction that it can

eventually resume hiking rates, although policymakers again

sounded a cautious note on the economic outlook amid lingering

uncertainties over global trade.

The Nikkei ended the day up 1% at 41,069.82, while

the broader Topix added 0.8%.

Ahead of the policy decision, traders had firmed up bets for

the BOJ to resume raising rates from as early as October after

Tokyo reached a long-awaited trade agreement with Washington

earlier this month, removing a degree of uncertainty from the

economic outlook.

In its quarterly outlook report, the BOJ said that while

trade talks had seen progress, uncertainty surrounding each

country's negotiations and the economic and inflationary impact

remain high.

"The BOJ continues to be cautious on global risks,

especially the tariff policy from the United States," said Tohru

Sasaki, chief strategist at Fukuoka Financial Group.

"And actually, between Japan and the U.S., their

understanding of the tariff agreement is totally different, so

there's still uncertainty."

On the Nikkei, earnings were a big driver of stock moves on

Thursday. Kyocera ( KYOCF ) jumped 9.5%, while Astellas Pharma ( ALPMF )

climbed 6.1%.

At the other end, Panasonic Holdings ( PCRFF ) slumped 3%.

Shares of companies that benefit from a drop in copper

prices outperformed, with Fujikura ( FKURF ) rallying 6.6% and

Furukawa Electric ( FUWAF ) rising 5.8%.