JGBs edge down ahead of 10-year sale as Fed policy cues eyed
* MOF seen reopening current issue with 0.80 pct coupon
* Superlong tenor erases gains that pushed yields to multi-week lows
* 10-yr futures end flat on low trading volume
TOKYO, July 31 (Reuters) - Japanese government bonds edged down on Wednesday as investors sold to position for the next session's 10-year auction, though moves were small as markets awaited the outcome of the U.S. Federal Reserve meeting. The U.S. central bank's statement at the end of its two-day policy meeting later on Wednesday could offer clues on when the Fed might begin to taper its $85 billion per month of asset purchases. Weaker U.S. debt prices would weigh on JGBs although the two have not always moved in tandem lately due to diverging expectations of respective monetary policies. The Bank of Japan has pledged to maintain its easy policy to hit its target of two percent inflation within two years. "The BOJ is buying a lot in the 10-year zone in its easing operations, which should support demand at the sale tomorrow," said Tomohiro Miyasaka, fixed income analyst at Credit Suisse in Tokyo. The Ministry of Finance will offer 2.4 trillion yen ($24.48 billion) of 10-year bonds on Thursday. The ministry said it would reopen current issues for the July and August auctions unless their yields were to move 20 basis points or more. That means the sale will likely be a reopening, carrying a 0.80 percent coupon. The benchmark yield mostly stayed stuck in a narrow range between 0.80 percent and 0.90 percent since late May, before falling to a two-month low last week. Strategists at RBS Securities Japan wrote in a note to clients that they expect investor demand to flag from the previous sale of that tenor, in the light of its current richness on the yield curve. They expect the sale to rely on dealer short-covering demand, BOJ purchases and month-end index lengthening demand from Japan's massive Government Pension Investment Fund. "Banks are probably going to buy just to sell back to the central bank, but institutional investors are not eager to buy at such levels," said a fixed-income fund manager at a Japanese asset management firm in Tokyo. The benchmark 10-year yield rose half a basis point to 0.795 percent, not far above 0.770 percent touched last week, which was its lowest since May 14. The 10-year JGB futures contract ended flat at 143.62, on relatively thin volume of 16,050 contracts, falling short of the 20,000 level for the fourth straight session. The superlong tenor also inched down, erasing the morning's modest gains that pushed yields to multi-week lows. The 30-year yield was flat at 1.810 percent after earlier touching 1.800 percent, its lowest level since June 19. The 20-year yield added half a basis point to 1.705 percent after earlier sinking to 1.695 percent, its lowest level since June 28. Concerns that a planned national sales tax increase might be delayed or watered down have weighed on JGB market sentiment this week. But a senior official in Japanese Prime Minister Shinzo Abe's ruling party told Reuters on Wednesday that Abe would likely proceed with raising the national sales tax as planned.