TOKYO, May 16 (Reuters) - Japanese government bond

yields fell on Friday, tracking sharp declines of U.S. Treasury

yields overnight, and as weaker-than-expected economic data

underpinned demand for bonds.

The 10-year JGB yield fell 2 basis points to

1.455%. The two-year JGB yield fell 1 bp to 0.705%

and the five-year yield slipped 2 bps to 0.98%.

"JGB yield tracked U.S. Treasury yields' decline, while the

weak economic data prompted investors to buy safe-haven bonds,"

said Masahiro Yamaguchi, head of the investment research

department at SMBC Trust Bank.

Japan's economy shrank for the first time in a year and at a

faster pace than expected, data for the March quarter showed on

Friday, underscoring the fragile nature of its recovery now

under threat from U.S. President Donald Trump's trade policies.

Overnight, U.S. Treasury yields fell sharply after data

showed deceleration in the world's largest economy in April.

The 20-year JGB yield fell 2 bps to 2.375%.

Yields on longer maturities rose amid low liquidity and

ongoing concerns about weak demand.

The 30-year JGB yield edged up 0.5 bp to

2.96%, and the 40-year JGB yield climbed 2 bps to

3.455%.

"The market is hoping the government would step in to take

some measures to improve the demand," said Katsutoshi Inadome,

senior strategist at Sumitomo Mitsui Trust Asset Management.

"That includes the ministry of finance to reduce issuance of

the 30-year bonds," he said.

The gap between the 10-year JGB yield and the 30-year bonds

was at 150 bps, near a record high level,

signalling weak demand for the 30-year bonds.