(Updates prices)

By Rocky Swift and Junko Fujita

TOKYO, Nov 25 (Reuters) - Japan's longest-dated

government bonds slid on Tuesday ahead of a sale of securities

whose yields recently hit record highs, while shorter-term

papers fell on expectations the Bank of Japan may be closer to

raising its policy rate.

The 40-year Japanese government bond (JGB) erased gains from

earlier in the session, with the yield rising 1

basis point (bp) to 3.69%. The yield touched an unprecedented

3.745% on Thursday.

The 30-year yield rose 1 bp to 3.33%,

compared with its record high of 3.39% hit last week.

Yields move inversely to prices.

JGBs sank last week as details about Prime Minister Sanae

Takaichi's economic stimulus plan spurred concerns about the

nation's finances. The cabinet on Friday approved a 21.3

trillion yen ($135.95 billion) spending package, significantly

larger than the previous year's.

"The rise in interest rates reflects persistent concerns

about fiscal expansion and weak supply-demand dynamics," Mizuho

Securities chief bond strategist Noriatsu Tanji wrote in a note.

"However, in the 40-year zone, where many participants

prioritise absolute interest rate levels, the high interest rate

level itself should be positive."

Takaichi said in a speech on Friday that her spending plan

would be funded with new bond issuance if tax revenue is not

sufficient, and overall JGB issuance is expected to be smaller

than last year's.

The Ministry of Finance is due to sell about 400 billion yen

in 40-year JGBs on Wednesday. Demand at the sale may be weak due

to many unknowns about the government's financing plans, said

Naoya Hasegawa, chief bond strategist at Okasan Securities.

"The yield level is attractive, but it is not the time to

hurry up and buy bonds, with the market awaiting government

plans for JGB issuance for next year," Hasegawa said.

The BOJ is "nearing" a decision to raise interest rates,

board member Kazuyuki Masu was quoted as saying in a Nikkei

newspaper report over the weekend. The remark follows those by

Governor Kazuo Ueda on Friday signalling the chance of a

December rate hike.

The two-year JGB yield rose 1.5 bp to 0.965%,

and the five-year yield rose 1.5 bp to 1.325%,

both the highest since June 2008.

(Reporting by Rocky Swift; Editing by Janane Venkatraman and

Mrigank Dhaniwala)