By Junko Fujita TOKYO, Oct 28 (Reuters) – Japanese government bond (JGB) yields edged down on Tuesday, on expectations that Japan would not propose boosting its defence budget beyond its target to the United States. The 10-year JGB yield fell 2 basis points (bps) to 1.65%. The five-year yield fell 1 bp to 1.22%. Japan's new Prime Minister Sanae Takaichi met U.S. President Donald Trump earlier on Tuesday in Tokyo and discussed economic and security matters. Takaichi said on Friday that Japan aims to reach a defence spending goal of 2% of gross domestic product (GDP) in the current fiscal year through March, ahead of the original target of fiscal 2027. "Based on media reports earlier in the day, the U.S. did not seem to have requested Japan to increase the spending beyond the 2% target," said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management. "That lifted investor sentiment," he said. Worries around an increase in government spending added upward pressure on yields of super-long-dated bonds. The 30-year JGB yield rose to a record high this month after fiscal dove Takaichi was elected as the leader of the ruling Liberal Democratic Party. She subsequently became the nation's prime minister last week. The two-year JGB yield fell 0.5 bp to 0.935%. The 20-year JGB yield fell 0.5 bp to 2.6%. The 40-year JGB yield fell 0.5 bp to 3.405%. The 30-year JGB yield rose 0.5 bp to 3.08% as a result of the Bank of Japan's bond buying operations for the bonds with maturities of more than 25 years being weak, Inadome said. On Tuesday, the BOJ offered to buy bonds with maturities from one year to more than 25 years. Outcome of the other maturities was firm, Inadome said. (Reporting by Junko Fujita; Editing by Rashmi Aich)
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