(Updates prices as of 0748 GMT, adds governor Ueda comment from

media conference)

By Kevin Buckland

TOKYO, March 19 (Reuters) - The yen weakened and

Japanese government bond yields fell after the Bank of Japan on

Tuesday announced an exit from years of ultra-easy monetary

policies, marking a historic shift from a decades-long fight

against deflation.

The Nikkei share average rose, reversing morning losses,

following volatile trading immediately after the central bank

said it was ending its negative interest rates policy and yield

curve control (YCC), as well as dropping purchases of risky

assets, including exchange-traded funds (ETFs).

The decision was widely expected after local and

international media, including Reuters, had reported over the

past week of a likely end to most or all of the BOJ's stimulus

programmes at this policy meeting.

That resulted in 'sell-the-fact' trade in Japanese markets,

analysts said.

The yen, in particular, appeared to have fallen victim, with

domestic rates still also extremely low compared with the United

States. The dollar jumped 0.76% to 150.285 yen as of

0748 GMT.

The Nikkei finished the day up 0.66% at 40,003.60,

recovering the psychological 40,000 mark for the first time

since hitting an all-time high at 40,472.11 on March 7.

The 10-year JGB yield lost 3 basis points to

0.725%.

One-month overnight index swaps surged to the

highest since 2016, when YCC and negative rates were put in

place.

Some dovish undertones in the BOJ's policy decision will

keep bond yields under pressure, said Shoki Omori, chief Japan

desk strategist at Mizuho Securities.

"Bond purchase amounts basically stay the same, which means

the BOJ isn't taking a hawkish stance," cheering investors such

as life insurers who need to buy bonds into Japan's fiscal

year-end this month, he said.

Omori also expects the yen to continue to fall.

"The yen remains a funding currency and is likely to keep

being utilized for carry trades," he said.

Tuesday's policy shift ushered in the first rate hike in

Japan since 2007, but it still keeps rates stuck around zero.

Addressing a press conference, BOJ Governor Haruhiko Ueda

said that while the achievement of the central bank's 2%

inflation target had come into sight, risks remained about wages

and consumption.

In its policy statement, the BOJ said it will continue its

JGB purchases at broadly the same amount as before, although it

will scale back the maximum limit of its purchases.

The BOJ's move to end its radical stimulus policies was in

part helped by the biggest wage hikes in 33 years at annual

negotiations with unions. Finance Minister Shunichi Suzuki said

on Friday that Japan had emerged from decades of deflation.

A positive cycle of price hikes and wage increases, as well

as solid earnings, helped drive a 19% surge in the Nikkei this

year, far outpacing a 6.6% rise for the MSCI World Index

.

"For the time being, I expect equity prices to increase,

with the uncertainty gone surrounding the meeting," said

Norihiro Yamaguchi, senior economist at Oxford Economics in

Tokyo.

"For a sustained rally, a rise in U.S. equities is also

necessary."