Japan's 10-year bond yield falls to 3-week low as BOJ rate hike bets ease

TOKYO, March 31 (Reuters) - Japan's 10-year government bond yield fell to a three-week low on Monday, as investors bought safe-haven assets on worries over an economic slowdown, while expectations for the Bank of Japan's (BOJ) interest rate hike receded.

The 10-year JGB yield JP10YTN=JBTC fell 5.5 basis points (bps) to 1.49%, its lowest level since March 11.

"The market had expected the BOJ would raise its policy rate to 1% by sometime next year, and raise further to 1.25% after that in the back of rising wages and prices," said Naoya Hasegawa, chief bond strategist at Okasan Securities.

"That expectations have weakened for now amid growing worries about the economic slowdown stemming from the U.S. tariff policy," Hasegawa said.

The bets that the BOJ would raise its policy rate at a faster pace than the market had expected sent the JGB yields to hit more than a decade-high earlier this month.

The central bank kept interest rates steady this month and warned of heightening global economic uncertainty, suggesting the timing of further rate hikes will depend largely on the fallout from potentially higher U.S. tariffs.

Japan's Nikkei share average tumbled on Monday to its lowest point in more than six months, as investors assessed the risk of the U.S. tariffs.

U.S. President Donald Trump is set to unveil a massive tariff plan on Wednesday, and said that his reciprocal tariffs will include all countries and not just a smaller group of 10 to 15 countries with the biggest trade imbalances.

The two-year JGB yield JP2YTN=JBTC fell 3.5 bps to 0.83% and the five-year yield JP5YTN=JBTC fell 5 bps to 1.1%.

The 20-year JGB yield JP20YTN=JBTC fell 1 bp to 2.24%.

The 30-year JGB yield JP30YTN=JBTC rose 1 bp to 2.535% and the 40-year JGB yield JP40YTN=JBTC rose 2 bps to 2.8%.