(Updates yield levels, adds comments)

TOKYO, April 3 (Reuters) - Japanese government bond

(JGB) yields tanked on Thursday, as bets for the Bank of Japan's

early interest rate hikes retreated as U.S tariffs stoked

worries about the slowdown of the global economy.

The 10-year JGB yield fell as much as 13

basis points to 1.34% earlier in the session to hit its lowest

level since February 26.

The yield posted its biggest drop since August 5, when bond

and stock markets were hit with their biggest swing since the

1987 'Black Monday' crash.

The 10-year bond yield was last down 9 bps at 1.38%. Bond

yields move inversely to prices.

"The market reaction was too big, but this is a reflection

that investors' expectation for the central bank's interest rate

hike was overheated," said Katsutoshi Inadome, a senior

strategist at Sumitomo Mitsui Trust Asset Management.

"They focused too much on domestic wages and prices and

underestimated the impact of the U.S. tariff plans."

Investors globally scrambled to the safety of bonds on

Thursday as U.S. President Donald Trump unveiled a

bigger-than-expected wall of tariffs around the world's largest

economy, upending trade and supply chains.

The bets that the BOJ would raise its policy rate at a

faster pace than the market had expected sent yields across some

tenors to 17-year highs only last week.

The central bank kept interest rates steady in March but

warned of heightening global economic uncertainty, suggesting

the timing of further rate hikes will depend largely on the

fallout from potentially higher U.S. tariffs.

Swap rates indicated a 9.5% chance of the BOJ raising rates

by 25 bps to 0.75% at its policy meeting in May.

The yields on other maturities fell sharply to their two

months lows, with the five-year yield slipping 9.5

bps to 0.98%, and the two-year JGB yield falling

fell 5.5 bps to 0.775%.