TOKYO, July 14 (Reuters) - Yields on Japanese government

bonds (JGBs) surged on Monday, toward historic levels last seen

in May, as concerns grew that an upcoming election could pave

the way for increased fiscal spending.

Prices for long-dated debt continued their decline from last

week, driving yields sharply higher, as prospects dimmed that

Prime Minister Shigeru Ishiba's ruling coalition will retain its

majority in the upper house after a vote on July 20.

A potential defeat could empower opposition parties that

have pledged in their campaign platforms to cut or abolish the

sales tax. Mounting fiscal concerns and soft demand at debt

auctions triggered a surge in super-long yields to record levels

in late May. In response, the Ministry of Finance curtailed its

issuance super-long JGBs, starting with sales this month.

"Broadening of the ruling coalition would quite likely

increase the probability of a reduction in the consumption tax

rate," Yusuke Matsuo, senior market economist for Mizuho

Securities, wrote in a note to clients.

That in turn would put "upward pressure on super-long

interest rates in a climate where global fiscal risk has already

been very much on the minds of bond market participants."

The 10-year JGB yield rose 7 basis points

(bps) to 1.57%, its highest since May 22. The 20-year yield

rose 7 bps to 2.57%, closing in on the 2.6% level

seen on May 23 that was the highest since October 2000.

The 30-year yield was up 7.5 basis points to

3.115%, nearing the all-time high of 3.185% hit on May 21.