(Rewrites headline and paragraph 1, adds comments, updates

yields)

By Junko Fujita

TOKYO, April 15 (Reuters) - Japan's super-long bond

yields fell after a strong 20-year bond auction, flattening the

curve as bets for an early rate hike by the Bank of Japan

weighed on appetite for shorter-dated bonds.

The 20-year Japan government bond yield fell

3 basis points to 3.24% while the 30-year yield

slipped 3.5 bps to 3.585% and the 40-year JGB yield

fell 4 bps to 3.805%.

Bond yields move inversely to prices.

Demand for the 20-year bond auction was strong in part

because of a lower monthly issuance, said Naoya Hasegawa, chief

bond strategist at Okasan Securities.

The finance ministry sold about 700 billion yen ($4.4

billion) of 20-year bonds, 100 billion yen less than previous

sales.

Sentiment was also lifted by a report from Bloomberg News on

Wednesday that BOJ officials may consider raising their

inflation forecast sharply at a policy meeting this month, said

Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust

Asset Management.

"Concerns about the risk of being "behind the curve" in

dealing with inflation have retreated. The market was convinced

that the BOJ would raise rates twice before the end of this

year," said Inadome.

Once seen as a strong possibility, BOJ's rate hike in April

is turning into a fainter prospect as fading hopes for an end to

the Middle East conflict keep markets volatile and muddle the

outlook for a fragile economy.

The BOJ's April 27 to 28 meeting comes a week after the

deadline of a fragile ceasefire between the U.S. and Iran that

has failed to end Iran's blockade of the Strait of Hormuz.

Swap rates indicate a 27.29% chance of a 25-basis-point rate

hike by BOJ in April and a 73% probability of a similar move in

June.

Talks to end the Iran war could resume in Pakistan over the

next two days, U.S. President Donald Trump said on Tuesday,

after the collapse of weekend negotiations prompted Washington

to impose a blockade on Iranian ports.

The two-year yield was unchanged at 1.37%. The

five-year yield inched down 0.5 bp to 1.83%.

The 10-year JGB yield fell 1 bp to 2.405%

($1 = 158.9400 yen)

(Reporting by Junko Fujita; Editing by Subhranshu Sahu and

Mrigank Dhaniwala)