(Updates with closing prices)

TOKYO, Feb 21 (Reuters) - Japan's Nikkei share average

reversed losses to end higher on Friday, as comments from Bank

of Japan Governor Kazuo Ueda eased worries that the central bank

may raise interest rates aggressively.

The Nikkei settled 0.26% higher at 38,776.94, after

falling as much as 0.6% earlier in the session on a stronger yen

and worries about U.S. tariffs. The index lost 1.2% for the

week.

The broader Topix inched up 0.07% to 2,736.53.

Ueda said the central bank stands ready to increase

government bond buying if long-term interest rates rise sharply.

"Ueda's comments pushed yields on Japanese government bonds

lower, which weakened the yen. That lifted demand for Japanese

equities," said Masahiro Ichikawa, chief market strategist at

Sumitomo Mitsui DS Asset Management.

Rising inflation has driven expectations that the BOJ

will keep raising interest rates higher and faster, pushing

yields on Japanese government bonds (JGBs) to more than

decade-high levels this week.

Ueda's comments came after data showed Japan's core consumer

inflation, a key gauge for policy, hit 3.2% in January, its

fastest pace in 19 months.

The yen retreated from a 2-1/2 month high hit after a jump

in Japanese inflation on Ueda's comments, while JGB yields

retreated from their more-than-a-decade highs.

The market was discouraged from active buying because the

currency might move during the three-day weekend, said Yugo

Tsuboi, chief strategist at Daiwa Securities.

Drug maker Chugai Pharmaceutical ( CHGCF ) jumped 4.47% to

become the biggest boost for the Nikkei. Chip-making equipment

maker Tokyo Electron ( TOELF ) rose 1%.

Uniqlo-brand owner Fast Retailing ( FRCOF ) fell 1.16% to

drag the Nikkei the most.

Of more than 1,600 shares trading on the Tokyo Stock

Exchange's prime market, 33% rose and 62% fell, with 3% trading

flat.

(Reporting by Junko Fujita; Editing by Varun H K and Mrigank

Dhaniwala)