Japan's Nikkei gains 1%, JGB yields edge up ahead of expected BOJ rate hike

(Updates prices ahead of midday trading recess)

By Kevin Buckland

TOKYO, Dec 19 (Reuters) - Japan's Nikkei share average rose on Friday, led by tech stocks, while government bond yields edged higher ahead of a widely expected Bank of Japan interest rate hike.

Equity investors took cues from U.S. trading overnight, which ?saw high-tech stocks leading all three of Wall Street's main indexes higher.

The Nikkei was up 0.9% at 49,429.54, as ?of 0145 GMT, after rising as much as 1% earlier in the day. ?That followed a 1% drop in the previous session, when ?the index sank to ?a 3-1/2-week low.

The broader Topix climbed 0.7% to 3,379.12.

"Japanese stocks liked what they saw from Wall Street," with "buying ?centred in high-flying chip and AI-related ?shares," said Maki Sawada, an equities strategist at Nomura Securities.

"The Nikkei declined quite significantly yesterday, so part of this move is a rebound from ?that," she said, adding that "it would be ?hard to ?extend gains from here" ahead of the BOJ decision.

Notable advancers on the Nikkei included startup investor SoftBank Group, which jumped 4.6%, and data-centre cable maker Fujikura (FKURF), which ?climbed 3.8%.

The BOJ decision does not come at a set time, but is generally between 0330 and 0500 GMT. BOJ Governor Kazuo Ueda will hold a news conference from 0630 GMT.

A large majority of economists in a Reuters poll predicted the central bank would raise short-term interest rates to 0.75% from 0.5%, which would ?mark the ?first increase since January.

"Economic conditions arguably justified a hike ahead of the monetary committee's October meeting, and recent data only strengthens the case," James Brady, ?vice president at Teneo, said in a note.

"The Bank's long-sought 'virtuous cycle' of wage growth and 2% inflation now appear closer than at any point in decades."

The 10-year JGB yield rose 1 basis point (bp) to 1.975%, taking it just below this week's 18-year high of 1.98%.

The 20-year yield added 1 bp to 2.945%, edging back towards this month's record high of 2.955%.

The two-year ?yield, which tends to be the most sensitive to monetary policy expectations, was steady at 1.065%, just below an 18-year peak.

Other tenors had yet to trade. Bond yields rise when prices fall.

Benchmark 10-year JGB futures ?fell 0.05 yen at 133.29 yen. (Reporting by Kevin Buckland; Editing by Rashmi Aich and Subhranshu Sahu)