Long-dated JGB yields jump most in a month as BOJ picks stoke fiscal concerns

By Junko Fujita and Satoshi Sugiyama

TOKYO, Feb 25 (Reuters) - Longer-dated Japanese government bond yields (JGBs) rose at the fastest pace in a month on Wednesday, after the nomination of two academics seen as dovish to the central bank's board stoked concerns about the nation's fiscal health.

The yield on the 40-year bond JP40YTN=JBTC, Japan's longest tenor, rose 10 basis points (bps) to 3.615%, the steepest advance since January 20, following Prime Minister Sanae Takaichi's calling of a snap election and embrace of sales tax cuts for food.

The 30-year yield JP30YTN=JBTC rose 9 bps to 3.365%. Yields move inversely to bond prices.

On the other hand, the two-year yield JP2YTN=JBTC, the most sensitive to Bank of Japan policy rates, fell 2.5 bps to 1.215%. The five-year yield JP5YTN=JBTC fell 1.5 bps to 1.580%.

Japan's government on Wednesday nominated Toichiro Asada, professor emeritus at Chuo University, and Ayano Sato, professor at Aoyama Gakuin University, both seen by markets as strong advocates of economic stimulus, to fill upcoming vacancies on the BOJ's policy board.

"As expectations for an early BOJ rate hike recede, there is downward pressure on medium-term yields, while concerns that the BOJ is behind the curve could put upward pressure on long-term yields," said Kazuya Fujiwara, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

The appointments of the two academics could influence discussions on the pace and timing of future rate hikes by shifting the composition of the nine-member board, which has increasingly tilted toward steady rate increases.

The shorter-dated yields began falling on Tuesday after local media reported that Takaichi expressed reservations about additional interest rate hikes during her meeting with BOJ Governor Kazuo Ueda last week.

The 10-year JGB yield JP10YTN=JBTC rose 3.5 bps to 2.135%, and the 20-year JGB yield JP20YTN=JBTC rose 7.5 bps to 2.955%.