Japan's Nikkei extends record run, bond yields rise ahead of BOJ decision

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 .N225 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 .TOPX 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 .SOX surged 3.6% to an all-time peak.

Shares in the semiconductor sector led the Nikkei's rally, with chip-testing equipment maker Lasertec 6920.T surging 13% to be the Nikkei's biggest percentage gainer.

Larger peer Advantest 6857.T 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 7203.T advanced 1.3%.

The yen was steady at 148.03 per dollar JPY=EBS early on Friday, following a two-day decline of more than 1%.

Japan's benchmark two-year sovereign bond yields JP2YTN=JBTC nudged up 0.5 basis point (bp) to 0.885%, their highest since June 2008.

The 10-year yield JP10YTN=JBTC 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.