TOKYO, July 31 (Reuters) - The yen added to losses while

Japanese government bond yields pared their earlier rise on

Friday after the Bank of Japan held interest rates steady, as

widely predicted.

The Nikkei share average pared gains slightly, but

remained more than 4% higher as chip-related shares rallied in

line with gains on Wall Street overnight after Microsoft ( MSFT )

delivered forecasts that eased fears about the

industry's massive AI infrastructure spending.

The yen was last 0.8% weaker at 160.68 per U.S. dollar

. On Thursday, it had shot up as much as 3.6% from near a

four-decade low after Japanese authorities conducted the first

intervention in three months to prop up the ailing currency.

Ten-year JGB futures initially extended gains after

the BOJ's policy decision, but then pared them to be up 0.04 yen

to 127.05 yen.

The two-year JGB yield, which is the tenor

most sensitive to the central bank's policy, pared an earlier

1.5 basis point rise to be up 0.5-bp at 1.5%. Yields move

inversely to prices.

Other cash bond tenors had yet to trade following the

announcement, which came during the midday trading recess.

The central bank held the key rate at 1%, having just raised

it in June, while signalling its resolve to continue pushing up

borrowing costs. It said risks to prices were skewed to the

upside, while risks to growth were evenly balanced.

"I got the impression that the statement was somewhat

hawkish," said Masato Koike, senior economist at Sompo Institute

Plus.

"My impression is that the likelihood of an October hike has

increased."

Over the remainder of this year, the BOJ has policy meetings

in September, October and December.