TOKYO, May 26 (Reuters) - Japanese government bond

yields edged up on Tuesday as concerns about the expansion of

government spending remain, while investors weighed the rise in

oil prices.

The benchmark 10-year JGB yield rose 3 basis

points (bps) to 2.720%. The five-year yield rose

1.5 bps to 1.97%. The 20-year JGB yield climbed

1.5 bps to 3.620%.

Yields move inversely to bond prices.

Prime Minister Sanae Takaichi said on Monday that a

supplementary budget she plans to prepare for the prolonged war

in the Middle East would not affect bond issuance in the market.

Takaichi said the extra spending will be financed by

deficit-financing bonds, but the overall amount of bond issuance

will remain unchanged from the original plan, as stronger tax

revenues are likely to eliminate the need for around 3 trillion

yen ($18.87 billion) in deficit bonds scheduled for issuance

through June.

"Concerns about the worsening fiscal health eased after

Takaichi said the amount of bond issuance to the market would

not increase even as the government is to compile the extra

budget," said Yuki Kimura, a bond strategist at Okasan

Securities.

"But the market is still concerned about the spending as

Japan would need to source funding for the possible reduction in

consumption taxes," she said.

The yields rose as the oil prices gained on Tuesday after the

U.S. military carried ​out strikes in Iran, keeping markets on

edge as a deal to end the war and open up the Strait of Hormuz

remained elusive.

"The market still wants to wait and see the situation in the

Middle East," said Kimura.

Still, investors see the rise in super-long bond yields as

having peaked following a better-than-expected outcome of last

week's 20-year bond auction, said Katsutoshi Inadome, senior

strategist at Sumitomo Mitsui Trust Asset Management.

The 40-year bond auction in the next session is expected to

see a firm outcome, as appetite for super-long bonds has

improved, he said.

($1 = 158.9900 yen)