Japan's yields on shorter-dated bonds fall as US Treasury yields drop?

TOKYO, March 14 (Reuters) - Yields on shorter-dated Japanese government bonds fell on Friday, supported by overnight declines of U.S. Treasury yields, while those on longer-dated bonds rose amid a lack of demand at the fiscal year-end.

The two-year JGB yield fell 1 basis point to 0.845% and the five-year yield fell 1.5 bps to 1.135%.

"The declines in the U.S. Treasury yields underpinned sentiment for the bonds with shorter maturities, but the overall market sentiment is not good," said Keisuke Tsuruta, a senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

"Demand is limited at the end of the fiscal year, while there is a caution ahead of the Bank of Japan's policy meeting next week," he added.

The BOJ is set to keep interest rates steady next week and discuss how much risk the escalating U.S. trade war poses to the export-reliant economy, which will be key to the timing of its next rate hike.

The signs of wage rise also drove caution for interest hikes, strategists said. Big Japanese firms this week offered bumper pay hikes in wage talks with unions for a third consecutive year, backing the BOJ's view that sustained wage gains will keep inflation durably around its 2% target.

The 10-year JGB yield was flat at 1.545%.

The 20-year JGB yield rose 0.5 bp to 2.28% and the 30-year JGB yield was flat at 2.6%.

The 40-year JGB yield rose 1 bp to 2.935%.

U.S. Treasury yields fell on Thursday as tumbling stocks boosted demand for safe-haven U.S. government debt with an escalating trade war between the United States and trading partners threatening to dent growth and boost inflation.

(Reporting by Junko Fujita; Editing by Krishna Chandra Eluri)