TOKYO (AP) _ The dollar fell sharply against the yen Thursday morning, triggering a modest rebound in share prices on the Tokyo Stock Exchange and a decline in bond yields.

The dollar closed the morning session at 157.45 yen, down 1.18 yen from Wednesday's close. The dollar opened at 158.30 yen and ranged widely between 156.95 yen and 158.30 yen during the morning.

Following the yen's rebound, the 225-issue Nikkei Stock Average regained 105.53 points, or 0.34 percent, ending the morning session at 31,369.10. The index shed 562.39 points Wednesday.

The price of the benchmark No. 119 Japanese government bond rose to 86.48 points late in the morning from Wednesday's close at 86.14. The dropped the yield to 7.25 percent from 7.32 percent.

The Nikkei index fell in early trading because of large-scale, index-linked selling, but it soon bounced back in reaction to the yen's rise against the dollar, said Tomoyuki Morimoto, a dealer with New Japan Securities Co.

''Recovery in bond prices also encouraged market players and prompted their buying,'' he said. ''But the market's purchasing power is still limited because of a lingering pessimism among participants.''

The dollar's decline was a continuation of a weaker trend that began in New York overnight. There, the dollar temporarily rose above 159 yen but turned downward and ended at 158.59 yen following intervention by the U.S. Federal Reserve.

Fuji Bank dealer Kenzo Shinomiya said the dollar's weakness reflected selling by market players who sought to take profits after buying the dollar during its strong rise in recent weeks.

''But the dollar's recent uptrend is not over yet. Today's fall is only a temporary break in a continuing trend,'' he said.

Traders said intervention by the Bank of Japan helped push the dollar down. The central bank was seen selling several million dollars Thursday in an attempt to support the yen.

Meanwhile, Finance Minister Ryutaro Hashimoto said he hopes exchange rates will come to reflect real economic conditions, Kyodo News Service reported.

Kyodo also quoted Hashimoto as saying he intends to urge cooperation among the Group of Seven nations on currency stability at their meeting scheduled for April 7 in Paris.