TOKYO, March 24 (Reuters) - Japanese government bonds

(JGBs) rose on Tuesday as investors saw signs of an off-ramp in

the Middle East conflict after U.S. President Donald Trump held

off on striking Iran's energy infrastructure.

The benchmark 10-year JGB yield

fell 2.5 basis points to 2.280%, retreating from Monday's

two-month high of 2.305%. Yields move inversely to bond prices.

"Improved external conditions are likely to support a firm

start, with buying interest leading the way," said Keisuke

Tsuruta, senior bond strategist at Mitsubishi UFJ Morgan Stanley

Securities.

Still, he added that the pace of short-covering in

government bonds may gradually lose momentum due to persistent

uncertainty surrounding the conflict.

Trump postponed a threat to bomb Iran's power grid because

of what he described as productive talks with unidentified

Iranian officials. Iran, however, denied that it had engaged in

negotiations with the U.S.

The 20-year JGB yield slid 2 bps to 3.145%.

The 30-year yield sank 1 bps to 3.550%. Other

tenors were yet to be traded as of 0023 GMT.

Japan's core consumer inflation hit 1.6% in February to

slide below the Bank of Japan's 2% target for the first time in

nearly four years, data showed on Tuesday, complicating its

efforts to justify further interest rate hikes.

The finance ministry is set to auction about 400 billion yen

of 40-year bonds later in the day.