TOKYO, Feb 27 (Reuters) - Japanese government bond (JGB)

yields rose on Thursday as bets on the Bank of Japan's early

interest rate hike revived, after heavy bond buying was

triggered this week, following the comments by the central

bank's governor Kazuo Ueda.

The 10-year JGB yield rose 3 basis points to

1.395%. The two-year JGB yield rose 2 bps to

0.815% and the five-year yield rose 3 bps to

1.045%.

"The yields started falling after comments from BOJ

Governor Ueda on Friday last week. His comments became a trigger

for closing short positions," said Shinji Ebihara, chief fixed

income strategist at Tokio Marine Asset Management.

"But because the market believes that the BOJ will keep

raising rates, there were little cues for investors to continue

buying JGBs."

Ueda said on Friday the central bank stood ready to increase

government bond buying if long-term interest rates rise sharply,

halting the yields' sharp rises. The two-year JGB yield, the

most sensitive to the BOJ's policy, fell to as low as 0.78% this

week, its lowest level since Feb. 14.

A weak outcome of the two-year JGBs earlier in the day also

hurt sentiment.

"Investors are cautious about active bets because there will

be auctions for 10-year and 30-year JGBs next week," Ebihara

said.

Japan's bond yields rose also after the country's top

currency diplomat, Atsushi Mimura, said on Wednesday he did not

see any disparity between recent rises in the yen and a slew of

positive economic data.

The comments underscored Tokyo's view that the currency's

rebound was broadly in line with an improving economy that could

justify hikes in Japan's interest rates.

The 20-year JGB yield rose 2.5 bps to 2.05%

and the 30-year JGB yield rose 1.5 bps to 2.335%.

The 40-year JGB yield rose 3 bps to 2.65%.