TOKYO, March 18 (Reuters) - Japanese government bond

(JGB) yields dropped on Wednesday after concerns over inflation

receded following a pause in oil price rally, although the

decline was limited as investors awaited the Bank of Japan's

upcoming policy decision.

The 10-year JGB yield fell 3 basis points

(bps) to 2.235%. The two-year yield slipped 1.5

bps to 1.255%, and the five-year yield fell 2 bps

to 1.660%.

Yields move inversely to bond prices.

Oil prices eased after the Iraqi government and Kurdish

authorities reached a deal to resume oil exports via Turkey's

Ceyhan port, providing modest relief to concerns about Middle

East supplies.

JGB yields had been trending higher recently, as the Middle

East conflict pushed oil prices up and added pressure on global

central banks to address inflation fears.

The Bank of Japan is widely expected to keep interest rates

steady on Thursday after its two-day policy meeting, but may

signal its intention to maintain a rate-hike bias, given that

the weak yen and elevated oil prices from the Iran war continue

to heighten inflationary pressures for the import-dependent

economy.

The market view has been divided on whether the central bank

will hurry in raising rates to cope with inflation or delay the

policy shift to sustain growth. Investor focus will be on BOJ

Governor Kazuo Ueda's comments after the policy meeting.

"Ueda will intentionally be vague about its monetary

policy," said Katsutoshi Inadome, senior strategist at Sumitomo

Mitsui Trust Asset Management.

"He will not be excessively hawkish or dovish in his

post-meeting remarks."

The 20-year JGB yield fell 3 bps to 3.100%.

The 30-year yield slipped 3.5 bps to 3.515%.

The yield on the 40-year JGB fell 3.5 bps to

3.74%.