TOKYO, July 16 (Reuters) - Japan's 10-year government

bond yield fell to a three-week low on Tuesday, as market

players moved to cover their short positions amid rising

expectations of a U.S interest rate cut in September.

The 10-year JGB yield fell 3 basis points

(bps) to 1.015%, its lowest since June 26. The 20-year yield

also fell 3 bps to 1.835%, also its lowest since

June 26.

"There was little market-moving catalyst in Japan, so the

yields fell on overseas cues, which was expectations for the

U.S. rate cut," said Miki Den, senior Japan rate strategist at

SMBC Nikko Securities.

Economic data on producer prices and consumer sentiment

released last week bolstered expectations that the Federal

Reserve was likely to cut interest rates at its September

meeting.

Bets of a 25 bps rate cut in September are at 87.6%,

according to the CME FedWatch Tool.

Den said the downward trend will not last long as there are

uncertainties about the details of the Bank of Japan's bond

purchases.

The BOJ said last month it would lay out a detailed

bond-tapering plan at its July 30-31 policy meeting, which will

cover a period of around one to two years.

"Until the policy meeting, investors will stay away from

active buying and the yields are unlikely to drop further," Den

said.

The 30-year JGB yield fell 2 bps to 2.15% and

the 40-year yield fell 3 bps to 2.4%.

The two-year yield fell 1.5 bps to 0.31%.

The five-year yield fell 2 bps to 0.56%.

(Reporting by Junko Fujita; Editing by Varun H K)