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Japan's central bank keeps policy steady, but in split

vote

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BOJ announces start of ETF, REIT sales

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Nikkei falls from record high; JGB yields near 17-year

peak

(Updates after BOJ decision)

By Rocky Swift and Kevin Buckland

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

flipped to losses on Friday and the yen firmed after the Bank of

Japan (BOJ) kept interest rates steady as expected, but in a

split decision with two of the nine board members voting for a

hike.

The central bank also announced it will begin selling its

holdings of exchange-traded funds (ETFs) and real-estate

investment trusts, amassed over a decade of massive stimulus.

Japanese government bond futures sank, while the yield on

10-year sovereign debt jumped to a nearly 17-year peak.

"It came as a surprise," Hirofumi Suzuki, chief currency

strategist at SMBC, said about the BOJ's decision.

"With the start of ETF sales and two dissenting votes

against leaving policy unchanged, i.e., in favour of tightening,

the outcome was hawkish despite expectations for a

straightforward hold."

The focus now falls on BOJ Governor Kazuo Ueda's news

conference at 0630 GMT.

The Nikkei 225 Index lost 1% to 44,800.40 as of 0410

GMT, not long after the central bank's announcement.

Earlier, it rose as much as 1.2% to a record high of

45,852.75, driven by a surge in chip-sector stocks following an

overnight rally in U.S. peers.

The 10-year JGB yield added four basis points

(bps) to 1.635%, just short of this month's high of 1.64%, a

level not seen since July 2008.

Benchmark 10-year JGB futures shed 0.4 yen to

136.16 yen.

Bond yields move inversely to prices.

The yen strengthened as much as 0.5% to 147.27 per dollar

, undoing part of the last two sessions' 1% drop.