(Recasts, updates prices, adds a fresh analyst comment)

By Satoshi Sugiyama

TOKYO, April 30 (Reuters) - Japan's government bond

yield curve steepened on Thursday, with the benchmark 10-year

yield hitting a 29-year high, as reports of U.S. military action

to end the Iran stalemate drove oil to a four-year high and

fuelled inflation concerns.

The benchmark 10-year JGB yield rose 5.5 basis

points to 2.515%, the highest since June 1997. The 20-year JGB

yield and the 30-year yield

climbed 9 bps to 3.395% and 3.730%, respectively.

The yield on the 40-year JGB, Japan's longest

tenor, rose 11.5 bps to 3.98%. Yields move inversely to bond

prices.

"Higher oil prices and the risk of further deterioration in

the situation around the Strait of Hormuz are weighing on the

market, leading to stronger selling pressure in the long end of

the bond market," said Ryutaro Kimura, fixed-income strategist

at BNP Paribas Asset Management.

"It raises the risk of further price increases, and judging by

global market scenarios as well, the current move is likely to

heighten inflation concerns," he said, adding the Bank of

Japan's reluctance to signal a near-term rate hike has also

reinforced pressure on yields at the long end.

The Japanese central bank kept its policy rate steady at

this week's meeting.

Brent crude futures for June added $6.81, or 5.8%, to

$124.84 a barrel as of 0527 GMT, after Axios reportedU.S.

President Donald Trump will receive a briefing later in the day

on new plans for potential military action against Iran.

The curve, a line plotting yields with various bond tenors,

steepens when the gap between shorter and longer ends widens. On

Thursday, it bear-steepened as long-term interest rates rose

faster than short-term rates.

The five-year yield rose 4 bps to a record high

of 1.895%. The two-year JGB yield, which is most

sensitive to BOJ policy, pared early gains to 1.375%, up 0.5 bp

on the day following strong auction results.

Japanese yields were likely catching up with the rise in U.S.

interest rates during Japan's market holiday on Wednesday, while

a weaker yen also stoked concerns about imported energy-driven

inflation, making longer-dated bonds less attractive, said Miki

Den, senior Japan rate strategist at SMBC Nikko Securities.

"With the holiday period approaching, investors may be reducing

risk ahead of the break, which could be contributing to the

steepening," Den said.

Japan entered the "Golden Week" holidays on Wednesday, when

trading ​becomes thin.

Separately, Reuters reported that Japan is considering

reinstating electricity and natural gas subsidies for three

months starting July, with funding of up to about 500 billion

yen, to be drawn from reserve funds rather than a supplementary

budget.

($1 = 160.4700 yen)