TOKYO, July 25 (Reuters) - Short-term Japanese

government bond yields rose on Thursday while those on

longer-dated debt eased, flattening the yield curve amid

speculation that the Bank of Japan (BOJ) could tighten monetary

policy at its meeting next week.

The two-year JGB yield rose 2.5 basis points

(bps) to 0.39% as of 0542 GMT, and earlier reached 0.395% for

the first time since June 3.

The 30-year yield, meanwhile, fell 4 bps to

2.155%.

Reuters reported on Wednesday that the BOJ is likely to

debate whether to raise interest rates at its July 30-31

gathering, and could also reduce its monthly bond purchases by

about half.

The BOJ raised rates for the first time since 2007 in March,

but has refrained from further hikes so far.

Several high-profile Japanese politicians in recent days

have urged a normalisation of monetary policy, including Prime

Minister Fumio Kishida.

The other two - Toshimitsu Motegi, secretary-general of the

ruling Liberal Democratic Party (LDP), and Digital

Transformation Minister Taro Kono - are rivals to Kishida in

September's LDP leadership race.

"There is a belief that the BOJ might hike this month," said

Shoki Omori, chief Japan desk strategist at Mizuho Securities.

"Although they didn't specify July, Kishida, Kono and

Motegi, they all hinted at the need to hike rates in the near

term."

However, Omori thinks the BOJ will forgo higher borrowing

costs this time, with a slowing U.S. economy already set to have

a knock-on effect on Japan's growth.

"Fundamentals in Japan are just too weak to support a rate

hike now," he said.

The five-year JGB yield rose 1.5 bps to

0.630%, while the 10-year yield fell 0.5 bp to

1.065% and the 20-year yield lost 1 bp to 1.850%.

Benchmark 10-year JGB futures declined 0.05 yen to

142.75 yen.

(Reporting by Kevin Buckland; Editing by Janane Venkatraman

)