TOKYO, July 18 (Reuters) - Japanese government bonds

rose on Friday as concerns over potential deterioration of

fiscal health receded ahead of a closely watched national

election.

The 40-year JGB yield fell as much as 8

basis points (bps) to 3.295%, and was last at 3.35%.

The 30-year JGB yield fell 6 bps to 3.03%,

before moving slightly higher at 3.065%.

Yields move inversely to prices.

"Those bonds were sold too heavily this week," said Takeshi

Ishida, a strategist at Kansai Mirai Bank.

Japanese government bonds with super-long maturities were

sold heavily this week amid concerns about the nation's fiscal

health ahead of the upper house election.

Prime Minister Shigeru Ishiba's Liberal Democratic Party

(LDP) and its partner Komeito are forecast to lose their

majority at the election on Sunday.

The market feared that a potential defeat could empower

opposition parties, which are seeking to cut or abolish the

sales tax, leading to expansion of spending.

"These concerns have been eased by now. Even as Japan ends

up cutting consumption tax, the scale of the cut will be limited

so that the fiscal condition will not be heavily worsening,"

said Ishida.

The 20-year JGB yield fell 4.5 bps to 2.525%

and the 10-year JGB yield fell 3.5 bps to 1.52%.

The yield curve will steepen next week if the LDP-led

coalition loses a majority, Ishida said.

If Japan reaches an agreement with the United States on

trade talks to avert a 25% tariff on the weekend, the Bank of

Japan will be under pressure to raise interest rates, which

would push up the yields on shorter-dated bonds, he added.

Later in the day, Ishiba will meet U.S. Treasury Secretary

Scott Bessent in Tokyo, who is visiting Japan to attend the U.S.

national day at the World Expo 2025 in Osaka on Saturday.

Japan's top trade negotiator Ryosei Akazawa will be in Osaka

on Saturday to receive the U.S. delegation led by Bessent.

The two-year JGB yield fell 1.5 bps to 0.765%.

The five-year yield fell 3.5 bps to 1.045%.