TOKYO, July 24 (Reuters) - Japanese government bond

yields rose on Wednesday as a poorly received auction of 40-year

debt left investors unsettled, who were already cautious ahead

of a crucial Bank of Japan policy meeting next week.

The 40-year JGB yield rose 3.5 basis points

(bps) to 2.460%, with a measure of demand at the auction falling

from the previous sale in May.

The 10-year JGB yield added 1 bp to 1.070%.

Benchmark 10-year JGB futures closed the session

down 0.1 yen at 142.8 yen. Yields rise when prices fall.

The BOJ will set policy on July 31, and has already flagged

it will announce a "significant" reduction to its monthly bond

purchases at the meeting. Speculation is rising that the central

bank may also raise interest rates the same day, following

comments from some high-profile politicians supportive of higher

borrowing costs.

A Reuters poll of economists conducted earlier this month

showed more than three quarters of respondents expected the BOJ

to forgo a rate hike this time.

"Sentiment in the JGB market has been weak since last week,

as the BoJ's meeting is right ahead," said Norihiro Yamaguchi,

senior Japan economist at Oxford Economics.

"The uncertainty itself has investors avoiding new entry

into the market."

The 30-year JGB yield advanced 2 bps to

2.195%, while the 20-year yield rose 0.5 bp to

1.860%.

The two-year yield gained 1 bp to 0.360%. The

five-year yield added 1.5 bps to 0.615%.