TOKYO, Oct 25 (Reuters) - Japanese government bond

yields edged lower on Friday, tracking a fall in U.S. Treasury

yields, although the declines were capped as the market remained

cautious about a close-call domestic election this weekend.

The 10-year JGB yield was last down 0.5 basis

point at 0.95%, while 10-year JGB futures rose 0.06

points to 144.02 yen.

Benchmark U.S. 10-year Treasury yield fell from a

three-month high on Thursday after reaching levels that drew

buying interest, putting downward pressure on JGB yields.

But moves were subdued on the last day of trade before votes

are cast and counted in Japan's lower house election on Oct. 27.

Depending on how many seats the ruling Liberal Democratic

Party loses, it could be forced into power-sharing deals with

opposition parties.

Japan's markets are "fearful" that the LDP-Komeito

coalition will lose the majority, with the bond market worried

that could lead to bigger spending, said Naka Matsuzawa, chief

macro strategist at Nomura Securities.

"When the coalition needs to find another partner, they are

in general more fiscally expansionary," he said.

That concern had caused superlong JGB yields, which tend to

be the most sensitive to fiscal risk premium, to rise earlier

this week.

The risk of ending up with a minority coalition government

is also raising concerns that it could complicate the Bank of

Japan's monetary policy outlook.

The BOJ is expected to stand pat at its monetary policy

meeting next week, although it will probably signal a less

dovish policy outlook.

Inflation data for Japan's capital in October released on

Friday showed core inflation dipped below the central bank's 2%

target for the first time in five months.

The 20-year JGB yield slid 1.5 bps to 1.78%,

while the 30-year yield fell 1 bp to 2.19%.

The two-year yield and five-year yield

were both flat at 0.445% and 0.58%, respectively.

(Reporting by Brigid Riley; Editing by Varun H K)