TOKYO, April 20 (Reuters) - Japanese government bonds

rallied on Monday as investors gauged how inflationary pressures

will affect the timing of the rate increases by the central

bank.

The benchmark 10-year JGB yield, which last

week touched a 29-year high of 2.49%, fell 2.5 basis points

(bps) to 2.395%. The five-year yield, which jumped

to a record 1.9% on April 13, slid 2 bps to 1.815%. Yields move

inversely to bond prices.

Bank of Japan Governor Kazuo Ueda said last week that Japan

is facing rising inflation from a "negative supply shock," which

is more difficult to rein in with monetary policy than inflation

driven by strong demand.

A quarterly BOJ survey on Monday showed that inflation

expectations among households held roughly steady, with 83.7% of

respondents saying they believed prices will be higher a year

from now.

"The market's main scenario appears to be that a rate hike

will be put off next week," Miki Den, a senior Japan rate

strategist at SMBC Nikko Securities, said in a note.

"However, even if an April rate hike is indeed postponed,

Governor Ueda's stance at the press conference could change

depending on the data available leading up to the monetary

policy meeting."

The BOJ last raised its key rate in December, lifting it to

0.75%, as it seeks to normalise monetary policy after more than

a decade of massive stimulus. Bets for another hike at the BOJ's

April 28-29 meeting stood at about 60% earlier this month.

But recent signals from central bank officials have reduced

those expectations, as imported energy costs from the Middle

East crisis cloud the inflation picture and risk a slowdown in

the economy. Tokyo Tanshi interest rate swaps data on Friday

indicated just an 18% chance of a hike next week.

The two-year JGB yield, the one most sensitive

to BOJ policy rates, edged half a basis point lower to

1.355%.

(Reporting by Rocky Swift in Tokyo; Editing by Subhranshu Sahu)