JGB yields slide after BOJ cuts economic growth forecasts

TOKYO, May 1 (Reuters) - Japan's government bonds (JGBs) rose on Thursday, driving yields lower, after the nation's central bank said it had become more pessimistic about the economy.

The Bank of Japan (BOJ) kept interest rates steady on the day and slashed its growth forecasts as the hit to global demand from higher U.S. tariffs cloud the outlook for the country's fragile economic recovery.

"The market reacted to BOJ's pessimism, seen in the statement about how the global economy would affect its intention to raise policy rates," said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management

"The market took this as dovish and started buying JGBs. The 10-year JGB yield slipped more than it should," he added.

In a widely expected move, the board decided to keep the BOJ's short-term policy rate unchanged at 0.5% by a unanimous vote.

The central bank maintained its official stance to raise rates in the future to keep the yen from weakening before Japan's trade negotiator, Ryosei Akazawa, visits Washington for critical tariff talks, Inadome said.

The 10-year JGB yield JP10YTN=JBTC fell 5 basis points to 1.26%, a three-week low, while benchmark 10-year JGB futures 2JGBv1 rose 0.66 yen to 141.31.

The five-year yield JP5YTN=JBTC fell 5.5 basis points to 0.825%.