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Japanese chip shares lead gains after U.S. peers rally

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JGB yields climb, yen weak after jump in U.S. bond yields

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BOJ widely seen forgoing interest rate hike on Friday

(Updates prices ahead of midday trading recess)

By Rocky Swift and Kevin Buckland

TOKYO, Sept 19 (Reuters) - Japan's Nikkei share average

extended its winning streak on Friday, climbing more than 1% to

a record peak, ahead of an expected hold on policy from the Bank

of Japan.

The rally in Japan mirrored gains on Wall Street, where

stocks hit fresh highs following an interest rate cut by the

U.S. Federal Reserve earlier this week, along with projections

for further easing later this year.

Benchmark Japanese government bond yields rose to a two-week

high and the yen languished close to 148 per dollar after U.S.

Treasury yields climbed to a two-week peak.

U.S. labour market data overnight showed some rare recent

strength, slightly tempering expectations for further Fed

easing.

The Nikkei 225 Index jumped as much as 1.2% shortly

after the open, reaching a record high of 45,852.75, and was

last up 1.1% at 45,788.66. The broader Topix climbed

0.9% to an all-time high of 3,187.98.

The BOJ does not announce its policy decision at a fixed

time, but it typically comes sometime after 0230 GMT. Governor

Kazuo Ueda is scheduled to hold a news conference at 0630 GMT.

Overnight, all three of Wall Street's main indexes notched

record-high closes, with the outlook for easier monetary policy

buoying high-growth chipmakers and other high-tech shares. The

closely watched Philadelphia SE semiconductor index

surged 3.6% to an all-time peak.

Shares in the semiconductor sector led the Nikkei's rally,

with chip-testing equipment maker Lasertec ( LSRCF ) surging 13%

to be the Nikkei's biggest percentage gainer.

Larger peer Advantest ( ADTTF ) rose 2.2%, making it the top

contributor to the index's gains in point terms, due to its

significant weighting.

"Chip-sector stocks are again leading gains, but within that

group, those seen as related to AI data centers are particularly

strong, showing that investors are being more selective," said

Fumika Shimizu, a strategist at Nomura Securities.

"It seems likely that the Nikkei will close at a record high

again today."

The Nikkei closed above the 45,000 level on Thursday for the

first time.

Despite the supportive backdrop of easier Fed policy and

delayed BOJ tightening, there are signs Japan's stock market may

be overheating. An often-cited gauge called the Relative

Strength Index (RSI) was at 75 on Friday, well above the 70 mark

that analysts often use as a threshold for overbuying.

Stocks are also supported by a softer yen, which boosts the

value of overseas revenues and makes products more competitive

for Japan's heavyweight exporters.

Toyota Motor ( TM ) advanced 1.3%.

The yen was steady at 148.03 per dollar early on

Friday, following a two-day decline of more than 1%.

Japan's benchmark two-year sovereign bond yields

nudged up 0.5 basis point (bp) to 0.885%, their

highest since June 2008.

The 10-year yield rose 1.5 bps to 1.61%, a

two-week high.

Although the BOJ is largely seen as certain to leave rates

unchanged, a majority of economists polled by Reuters earlier

this month expect a hike within the next few meetings.

However, they are split on the timing, with bets centering on

October and January.

Japanese consumer inflation figures on Friday showed price

pressures cooled last month, although the 2.7% rise was still

well above the BOJ's 2% target.