* Central bank flags inflation risks without signalling

urgency to tighten

* Yen steady near 160-per-dollar level seen as danger zone

for intervention

* AI-related shares buoy Nikkei even as majority of

components decline

(Updates prices ahead of market close)

By Kevin Buckland

TOKYO, June 16 (Reuters) - Japan's Nikkei share average rose

to a record high on Tuesday after the Bank of Japan raised

interest rates as widely expected, without signalling urgency

for further tightening in monetary policy.

Japanese government bonds slid after the decision, while the

yen maintained a slightly stronger tone against the dollar.

Traders' attention will now be on the news conference by BOJ

Deputy Governor Shinichi Uchida from 0630 GMT, when markets

close, for any hints on the outlook for policy.

The Nikkei was up 0.2% at 69,474.95 as of 0555 GMT,

and earlier jumped as much as 1% to reach 70,020.68 for the

first time.

The broader Topix, however, was 0.4% lower at

3,984.30, after initially flipping to gains following the policy

announcement, but then retracing that advance.

The BOJ's decision came during the trading break for stocks

and bonds and had little initial effect on the yen, which

remained slightly firmer at 160.295 per dollar. At the

same time, it remained on the weaker side of the 160-per-dollar

level considered a line in the sand for intervention by Japanese

officials.

"The BOJ delivered what markets expected," said Charu

Chanana, chief investment strategist at Saxo. "But the reaction

shows this was not hawkish enough to force a major yen

repricing."

The central bank "is still moving in a very gradual way and

continues to say financial conditions will remain

accommodative," she added. "This is mildly supportive for

Japanese equities because the BOJ is tightening, but not in a

way that threatens liquidity or earnings."

Of the Nikkei's 225 components, 67 rose versus 157 that

fell, with one trading flat.

Several heavily weighted AI stocks had an outsized impact in

buoying the market. Chip-testing machinery makers outperformed,

with Advantest ( ADTTF ) gaining 3.6%, as did data centre plays,

with Fujikura ( FKURF ) and Furukawa Electric ( FUWAF ) up 8.6%

and 4.2%, respectively.

Benchmark 10-year JGB futures lost 0.50 yen to

127.76 yen. The yield on the 10-year cash bond

was 7 basis points (bps) higher at 2.655%. Yields rise when bond

prices fall.

Moves elsewhere on the curve were more muted, with the

two-year yield adding 1 bp to 1.405% and 30-year

yields rising 3.5 bps to 3.78%.

Prior to Tuesday, yields had been declining over the past

several weeks from record highs, with inflation fears receding

amid optimism for a near-term end to the Iran war.

The BOJ said in its statement that growth risks from the

Middle East conflict have diminished, but the price outlook

warrants attention.