TOKYO, May 13 (Reuters) - Japanese government bonds

plunged on Wednesday, driving yields to multi-decade and record

highs, as Middle East-driven inflation fears deepened a global

bond selloff ahead of key bond auctions.

Japan's benchmark 10-year JGB yield

rose 5 basis points (bps) to 2.590% and reached

as high as 2.6%, the highest since May 1997. The

policy-sensitive two-year yield climbed 1 bp

to 1.4%, a level last seen in May 1995.

Yields on five-year and 20-year bonds also touched record

highs.

Yields move inversely to bond prices.

The move mirrored sharp increases in yields on U.S.

Treasuries, UK gilts, and euro zone bonds overnight after

geopolitical risks pushed crude prices higher.

A sale of 10-year JGBs on Tuesday saw moderately firm

demand, but investors are now focused on upcoming auctions of

longer-term securities scheduled through the month.

"Demand at the auction was stronger than market

expectations, but it is questionable whether that was based on

real needs as there was a significant number of unidentified

bids," said Shuichi Osaki, a senior portfolio manager at Meiji

Yasuda Asset Management.

"Market players are cautious about betting on bonds ahead of

a series of auctions this month."

Japan's finance ministry will auction a 30-year bond on

Thursday and five-year debt on Friday, with 20-year and 40-year

sales later this month.

Meanwhile, oil prices rose for a third consecutive day on

Tuesday as hopes for a Middle East peace deal eased, raising

concerns over disruptions through the Strait of Hormuz.

The BOJ has signalled a potential rate hike as early as

June, following hawkish opinions among board members at its

April meeting.