TOKYO, April 23 (Reuters) - Japanese government bond

yields rose on Thursday as investors grew cautious about the

progress of talks between Iran and the U.S. in the Middle East.

The 10-year JGB yield rose 3 basis points

(bps) to 2.425%. The 20-year JGB yield rose 4 bps

to 3.275%. Yields move inversely to bond prices.

"Investors realised they were too optimistic about the

outlook of the war. The ceasefire was extended because Iran did

not agree to start the talks," said Masahito Sugawara, a senior

strategist at Daiwa Securities.

U.S. President Donald Trump made what appeared to be a

unilateral announcement on Tuesday that the U.S. would extend a

ceasefire until it had discussed an Iranian proposal in peace

talks to end the two-month-old war.

But Iranian officials did not say they had agreed to any

extension of the truce, and criticized Trump's decision to

maintain the U.S. Navy blockade of Iran's trade by sea, itself

considered by Iran an act of war.

Oil prices rose, and the dollar inched higher near a

1-1/2-week high on Thursday, while Japan's Nikkei

reversed course after briefly topping the 60,000 level.

JGB yields declined in recent sessions as the market bet

that oil prices might have peaked and that prospects for the

Bank of Japan's interest rate hike at its policy meeting next

week faded.

Investors sold bonds on Thursday in part because the outcome

of the BOJ's bond buying operation was weak, said Katsutoshi

Inadome, a senior strategist at Sumitomo Mitsui Trust Asset

​Management.

"Investors wanted to book profits from the latest rally in

the bonds," he said.

The two-year yield was flat at 1.35%. The

five-year yield rose 1.5 bps to 1.835%.