Japan bonds track Treasuries lower with fiscal worries as backdrop

By Kevin Buckland

TOKYO, Nov 14 (Reuters) - Japanese government bonds fell on Friday, pushing yields higher, as they tracked declines in U.S. Treasuries overnight amid growing doubts about an imminent Federal Reserve rate cut.

Longer-term Japanese yields rose more, steepening the yield curve - a trend that has been in place all month as investors fretted over the potential for less fiscal restraint under new Prime Minister Sanae Takaichi.

The 30-year JGB yield advanced 2 basis points (bps) to 3.21%, while the 20-year yield gained 1.5 bps to 2.71%.

The 10-year yield rose 1 bp to 1.7% and the five-year yield added 0.5 bp to 1.245%. The two-year yield was flat at 0.925%.

Takaichi said this week she would work on setting a new fiscal target extending through several years to allow more flexible spending, essentially watering down Japan's commitment to fiscal consolidation.

She has also asked the Bank of Japan to go slow in raising rates to align with her focus on fostering economic growth.

"In the super-long sector, Takaichi's fiscal policy measures are already priced in term premia, to some extent, but expectations for issuance cuts provide support in the near term and the final scope of fiscal stimulus may open up further room for a rise in yields," Barclays analysts wrote in a research note.

Meanwhile, the 10-year Treasury yield edged up slightly to 4.1173% on Friday after climbing 4.4 bps in the previous session.

A growing number of Fed policymakers in recent days have signaled hesitation on further easing, helping push financial market-based odds of a reduction in borrowing costs in December to near even.

Minutes of the Federal Open Market Committee's last meeting are due for release on Wednesday of next week.

(Reporting by Kevin Buckland; Editing by Harikrishnan Nair)