Japan's Nikkei holds onto gains as BOJ decision lacks surprises

By Kevin Buckland

TOKYO, July 31 (Reuters) - Japan's Nikkei share average held onto early gains on Thursday after the Bank of Japan kept interest rates steady as was widely expected, while revising up inflation forecasts.

That signalled the central bank's conviction that it can eventually resume hiking rates, although policymakers again sounded a cautious note on the economic outlook amid lingering uncertainties over global trade.

The Nikkei .N225 was up 0.9% at 41,015.31, as of 0351 GMT. The broader Topix .TOPX traded 0.7% higher.

Investor focus now turns to BOJ Governor Kazuo Ueda's press conference at 0630 GMT for hints on the timing of any rate increases.

Traders had firmed up bets for the BOJ to resume raising rates from as early as October after Tokyo reached a long-awaited trade agreement with Washington earlier this month, removing a degree of uncertainty from the economic outlook.

In its quarterly outlook report, the BOJ said while trade talks had seen progress, uncertainty surrounding each country's negotiations, and the economic and inflationary impact remain high.

"The BOJ continues to be cautious on global risks, especially the tariff policy from the United States," said Tohru Sasaki, chief strategist at Fukuoka Financial Group.

"And actually, between Japan and the U.S., their understanding of the tariff agreement is totally different, so there's still uncertainty."

On the Nikkei, earnings were the biggest driver of stock moves on Thursday. Kyocera 6971.T jumped 8.6%, while Astellas Pharma 4503.T climbed 6.9% and Nissan 7201.T rose 2.6%.

At the other end, Panasonic Holdings 6752.T slumped 3.4%.

Shares of companies that benefit from a drop in copper prices outperformed, with Fujikura 5803.T and Furukawa Electric 5801.T each rallying about 5.7%.

Startup investor SoftBank Group 9984.T was another standout performer, advancing 3.2%.