TOKYO, Oct 31 (Reuters) - Japan's 10-year government

bond (JGB) yield rose in early trade on Thursday as investors

awaited the Bank of Japan's (BOJ) policy decision on interest

rates later in the day.

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

to 0.96%.

While the policy will most likely remain unchanged, the

market is now cautious that the BOJ may amend the wording of its

reference to future policy, said Katsutoshi Inadome, senior

strategist at Sumitomo Mitsui Trust Asset Management.

"BOJ officials have said the central bank is in no rush to

raise rates, but BOJ Governor (Kazuo) Ueda may take out those

words today in his statement, which weighs on bond prices,"

Inadome said.

The BOJ ended negative interest rates in March and raised

its short-term policy target to 0.25% in July. But central bank

officials have since signalled a cautious and slow approach to

shifting policy.

It is expected to hold short-term interest rates steady on

Thursday and political uncertainty may force it to stay pat for

the rest of 2024, some analysts say.

"Depending on how a new coalition will be formed, the BOJ

wants to secure an opportunity to raise rates as early as

December by removing the 'no rush' from the statement," said

Inadome.

The Japanese ruling coalition's failure to retain a majority

in Sunday's lower house elections may force the Liberal

Democratic Party to court smaller opposition parties such as the

Democratic Party for the People (DPP) in order to stay in power.

Yuichiro Tamaki, head of the DPP, has said the BOJ should

avoid changing its ultra-loose monetary policy for now.

The 30-year bond yield fell 1 bp to 2.21%.

Other maturities were untraded as of 0112 GMT.

The yield curve has been shifting along with

expectations for the pace of policy tightening. The spread

between 2-year and 30-year JGBs went from 150

basis points in January to 192 in July. It is currently at 176.

In interviews and news conferences over the past two weeks,

Japan's major life insurers have outlined investment strategy

updates for the fiscal year ending in March 2025. A majority of

them expect to continue purchasing JGBs into the second half of

the fiscal year.