TOKYO, Sept 24 (Reuters) - Japanese government bonds

(JGBs) picked up on Wednesday as traders considered the economic

policies of the leading candidates to become the nation's next

prime minister.

The 10-year JGB yield fell 1 basis point (bp)

to 1.645%. The five-year yield edged 0.5 bp lower

to 1.220% after reaching a 17-year high on Monday. Bond yields

move inversely to prices.

JGBs have been under pressure in recent months due to global

concerns over widening government deficits, domestic political

uncertainty and declining bond purchases by the Bank of Japan.

Thirty-year yields touched a record high of 3.285% earlier

this month after fiscal hawk Shigeru Ishiba said he would step

down as prime minister, setting up a party vote on October 4 to

replace him.

Sanae Takaichi, a fiscally dovish contender for the

premiership, on Tuesday said the government should issue more

JGBs if necessary to combat household inflation.

Shinjiro Koizumi, another contender, said the government

should fund spending packages with expected increases in tax

revenues and spending cuts.

A Koizumi victory is looking more likely, which could lead

to a quick unwinding of so-called "Takaichi trades," betting on

higher stocks, a weaker yen and a steepening of the JGB yield

curve, according to Yusuke Matsuo, a senior market economist at

Mizuho Securities.

In addition, Takaichi appears to have moderated her

expansionist tone by "steering clear of directly commenting on

BOJ monetary policy or the possibility of lowering the

consumption tax rate," Matsuo wrote in a note.

The 20-year JGB yield fell 1.5 bps to 2.63%,

while the 30-year yield slid 1 bp to 3.170%.