TOKYO, July 8 (Reuters) - Japanese government bond

yields rose on Monday as data for a fast-paced wage increase

drove bets for another interest rate hike by the Bank of Japan.

The 10-year JGB yield rose 2 basis points

(bps) to 1.085%. The five-year yield rose 2 bps to

0.595%.

Japanese workers saw their average base pay climb 2.5% in

May, the fastest pace in 31 years, government data showed, as

bumper pay hikes offered by companies in annual wage

negotiations took effect.

"The outcome of the "shunto" wage negotiations has reflected

in wages, which drove expectations that the BOJ may raise

interest rates soon," said Katsutoshi Inadome, a senior

strategist at Sumitomo Mitsui Trust Asset Management.

Wages hold the key to how soon the central bank could raise

interest rates.

In mid-March, workers from the nation's largest trade unions

scored a 5.25% wage hike agreement after the annual wage talks

known as "shunto". The BOJ then made its landmark decision to

end negative interest rates and yield curve control policy.

The BOJ said on Monday that wage hikes are spreading to

smaller companies in regional areas as they scramble to retain

or hire workers.

"But until the market learns details on the outcome of the

BOJ's policy decision to be made later this month, the 10-year

JGB yield will not exceed a recent peak of 1.1%," said Inadome.

The BOJ next meets for a policy meeting on July 30-31, when

it will disclose details on its bond buying plans as well as

produce fresh quarterly growth and price forecasts that serve as

a basis for deciding future monetary policy.

The 20-year JGB yield rose 1 bp to 1.940%.

The 30-year JGB yield was flat at 2.200%.

The two-year JGB yield was also flat at 0.34%.