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UPDATE 1-Japan shares reverse early gains on rising U.S. bond yields

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(Updates with index declines)

By Junko Fujita

TOKYO, Jan 18 (Reuters) - Japanese shares reversed course to trade lower on Tuesday, as a jump in U.S. bond yields made investors cautious, prompting a sell-off in market heavyweights.

The Nikkei share average was down 0.6% to 28,158 by 0448 GMT, after rising as much as 0.9% earlier in the session. The broader Topix lost 0.78% to 1,971.27.

"Sentiment was weakened by rising U.S. Treasury yields. Investors thought the U.S. market would fall this evening," said Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities, adding mixed messages from the Bank of Japan after its policy meeting also weighed.

The Bank of Japan upgraded its inflation forecasts and flagged heightening chances the recent commodity-driven price hikes will broaden, the latest sign of its conviction Japan is emerging sustainably out of deflation.

U.S. Treasury yields jumped along the curve during Asian trading hours, lifting the shorter end to new pandemic highs, as traders braced for the possibility of a hawkish surprise from the Federal Reserve.

Benchmark 10-year yields rose more than 6 basis points to 1.8550% and Fed funds futures dived as markets baked in a hike in March and three more by the end of the year.

Uniqlo clothing store owner Fast Retailing cut its gains, while chip-making equipment maker Tokyo Electron reversed its course to lose 0.21%. Technology start-up investor SoftBank Group also gave up its gains to fall 0.22%. (Reporting by Junko Fujita; Editing by Sherry Jacob-Phillips and Subhranshu Sahu)