* 30-year yield falls below 20-year yield, curve inverted
* Nikkei climbs 3.5 pct to above 13,000 for 1st time in nearly 5 years
* Yen hits 3-1/2-year low after BOJ's decision on Thursday
By Dominic Lau and Ayai Tomisawa
TOKYO, April 5 (Reuters) - Japanese shares jumped to near five-year highs and government bond prices rose sharply on Friday, with the long-end of the yield curve inverting, a day after the Bank of Japan announced extraordinary stimulus measures to reignite the world's third-largest economy.
The massive stimulus steps promise to inject about $1.4 trillion into the economy in less than two years by buying government bonds across the yield curve as well as riskier exchange-traded funds.
Yields on benchmark 10-year Japanese government bonds sank as much as 12 basis points to a record low of 0.315 percent on Friday morning, while Tokyo's Nikkei stock average jumped as much as 4.7 percent to above 13,000 points for the first time since August 2008.
"It's the biggest day in my career," said Stefan Worrall, director of equity cash sales at Credit Suisse.
Worrall described it as a "reverse earthquake in terms of the flow", comparing it with a massive sell-off right after the earthquake and tsunami that hit Japan in March 2011.
"This is moved by the BOJ yesterday, and it was the action from many interested investors who have yet to participate in the rally, who were sitting on the sidelines wanting to see action after all of the hype and talk from the BOJ and Abe."
The benchmark Nikkei has surged 51 percent since mid-November when Prime Minister Shinzo Abe unveiled in his election campaign expansionary fiscal and monetary policies to pull Japan out of deflation.
The Nikkei was up 3.5 percent at 13,080.97 by late Friday morning, with volume at 14 percent above its full daily average for the past 90 trading days.
The yen hit a 3-1/2-year low of 97.06 to the dollar after dropping 3.6 percent on Thursday, its biggest one-day fall since October 2008.
Shares in real estate companies jumped 14.3 percent and financial firms also rose sharply as they were expected to benefit most from the reflationary drive, which will see the central bank double its monetary base to 270 trillion yen ($2.80 trillion) by the end of 2014.
The BOJ's policy is unmatched in scope even by the U.S. Federal Reserve's own quantitative easing programme. The Fed may buy more debt, but the Japanese central bank's stimulus is much larger as a proportion of the economy.
INVERTED YIELD CURVE
In the JGB market, 10-year futures reached a record high of 146.41 and the 30-year yield fell below that of 20-year debt, resulting in an unusual yield curve inversion.
Naomi Muguruma, senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities, said the curve inverted for the first time "in a long time," but it may be a temporary phenomenon.
"The supply/demand balance between 20- and 30-year JGBs was kind of distorted by the BOJ's announcement to purchase the longer end of the curve," Muguruma said.
"It could continue for a while, but we cannot say for sure unless the BOJ's actual purchases begin, and that might change investors' behavior," she said.
"Those who used to purchase 30-years would probably avoid buying at lower yields than the 20-year, so those investors would switch to 20-years and the inversion would be corrected. I think that's the rational reaction expected from investors."
The 30-year yield was last quoted at 1.010 percent, below that of 20-year's 1.040 percent.
Yields on 10-year JGBs fell 2 basis points to 0.415 percent, paring earlier declines, while 10-year futures shed 0.34 point to 145.70 as investors pocketed some profits.
"Many investors who were not even interested in Japan before have opened their eyes ... They realised that if they continue to look at Japan the way they did before, they are going to lose," said Tetsuro Ii, the chief executive of Commons Asset Management.
In terms of stock valuations, Japanese equities carry a 12-month forward price-to-earnings ratio of 14.1, slightly more expensive than the U.S. S&P 500's 13.7 but below its 10-year average of 16.3, according to Thomson Reuters Datastream.