TOKYO, May 27 (Reuters) - Japanese government bond

yields fell on Wednesday as the market awaited clearer signals

for whether the Bank of Japan will raise interest rates as early

as June, while improved appetite for debt supported the super

long end.

The 10-year JGB yield fell 3.5 basis point

(bp) to 2.685%. The two-year JGB yield fell 2 bps

to 1.38%, while the five-year yield fell 3.5 bps

to 1.93%.

Yields move inversely to bond prices.

BOJ Governor Kazuo Ueda said earlier in the day that central

banks should not look at oil prices in isolation, because a

temporary energy shock can become persistent if it feeds into

wages, expectations, and price-setting behavior.

"His remarks were rather hawkish, but he did not indicate

the BOJ could raise interest rates as early as next month," said

Masahito Sugawara, senior strategist at Daiwa Securities.

There were no specific signals on early rate hikes from the

remarks from BOJ Deputy Governor Ryozo Himino, who gave a public

speech on Tuesday, Sugawara said.

The 20-year JGB yield fell 3 bps to 3.59%,

and the 30-year yield fell 2 bps to 3.91%.

Yields fell despite concerns about worsening fiscal health

as the government mulls a possible reduction of consumption

taxes on food.

Demand for super long-dated bonds has improved because some

institutional investors need to buy JGBs to adjust their

portfolios as the stock market has rallied, to maintain

specified ratios between asset classes, said Masayuki Koguchi,

executive chief fund manager at Mitsubishi UFJ Asset Management.

The Nikkei index rose as much as 2.2% to hit a

record intraday high on Wednesday.

Periodic demand from investors who track bond indexes to

adjust their portfolio durations is a positive factor for

government debt at the super long end.

Investors tend to buy longer maturity bonds at the end of

the month as key indexes, such as the Nomura BPI, exclude

shorter-dated bonds, to replace them with longer-dated notes in

a move known as "big extension."

The 40-year JGB yield fell 2.5 bps to 4.065%

after a bond auction for the same maturity saw solid demand.