Japan's Nikkei rises as chip shares rebound; BOJ decision in focus

By Kevin Buckland

TOKYO, April 26 (Reuters) - Japan's Nikkei share average rose on Friday led by a rebound in chip-related stocks, while investors awaited the central bank's policy decision.

Chip sector shares recovered from Thursday's losses, tracking overnight gains in U.S. peers, with the Philadephia SE Semiconductor Index jumping nearly 2% even as Wall Street's three main indexes declined.

U.S. stock futures were pointing to gains for Friday though, following strong after-the-bell earnings from tech giants Alphabet and Microsoft.

The Bank of Japan is widely expected to leave interest rates unchanged on Friday, after just raising them for the first time since 2007 last month. However, investors are on guard for hawkish signals potentially aimed at propping up the yen, which has this month hit 34-year lows.

The time of the policy announcement is not set, but tends to come around the time stock markets reopen from the midday recess.

The Nikkei gained 0.5% to 37,811.98 as of 0222 GMT, making up some of Thursday's 2.16% slide. For the week, the index has added 1.95%, recouping part of the previous week's 6.21% tumble, its worst weekly performance since June 2022.

The broader Topix rose 0.38%, heading for a 1.8% advance for the week.

"Japanese equities are going to be mainly driven by U.S. equities," said Shoki Omori, chief Japan desk strategist at Mizuho Securities.

"Unless rate hike expectations strengthen, I don't see the BOJ having much of a direct impact on equities."

"What's more harmful is a further pricing out of U.S. rate cuts," which would see long-term Treasury yields target 5%, from around 4.7% currently, hurting tech shares in particular, he added.

Considering the Nikkei is still up close to 13% so far this year, there is scope for a slide back to 35,000, Omori said.

Tech shares were among the Nikkei's biggest supports, with chip-making equipment giant Tokyo Electron climbing 2.14% and startup-investor SoftBank Group gaining 1.82%.

Shin-Etsu Chemical bucked the trend among semiconductor stocks, with the silicon producer diving more than 6% after announcing it would offer a hefty premium in a takeover offer for Mimasu Semiconductor Industry. (Reporting by Kevin Buckland; Editing by Rashmi Aich)