TOKYO, Oct 29 (Reuters) - Japanese government bonds

(JGBs) held steady on Wednesday as concerns of a blowout in the

nation's finances waned and investors awaited the central bank's

rate decision the following day.

The benchmark 10-year JGB yield rose 1 basis

point (bp) to 1.65%, retracing from a 2.5 bp decline in the

prior session. The five-year yield rose 1.5 bp to

1.230%.

Yields move inversely to prices.

Prime Minister Sanae Takaichi told visiting U.S. President

Donald Trump on Tuesday that she was determined to bolster

Japan's defence capabilities. That followed a policy speech on

Friday, in which Takaichi said she aimed to meet a defence

spending goal of 2% of gross domestic product (GDP) in the

current fiscal year, above a previous target.

Concerns that the U.S. might demand an increase in

defence spending to as much as 5% of GDP appear to have been

avoided, according to Mizuho Securities chief bond strategist

Noriatsu Tanji.

"It is reasonable to conclude that the increase in

defence spending will not cause the overall budget size to

balloon," Tanji wrote in a note.

Worries around a rise in spending have put upward pressure

on yields of super-long-dated bonds of late. The 30-year JGB

yield rose to a record high of 3.345% earlier this month after

fiscal dove Takaichi was elected as the leader of the ruling

Liberal Democratic Party, and then later was made premier.

The 30-year JGB yield was flat at 3.060% on

Wednesday.

Most analysts expect the Bank of Japan will keep interest

rates steady at 0.5% at the end of its two-day meeting on

Thursday. Two hawkish BOJ board members are likely to repeat

their proposals made in September to hike rates to 0.75%.

U.S. Treasury Secretary Scott Bessent urged Japan's

government on Wednesday to give the central bank scope to raise

interest rates, escalating his warning to Tokyo against keeping

the yen too weak through prolonged low borrowing costs.