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JGBs shed early losses as Abe's victory underlines easy BOJ policy

TOKYO, Oct 23 (Reuters) - Japanese government bond prices erased early losses on Monday after Prime Minister Shinzo Abe's ruling bloc scored a big election win, ensuring his reflationist economic policies will stay in place.

Earlier in the session, JGBs slipped as Japanese share prices spiked to 21-year highs following the election, but they gradually shed losses as bargain-hunting set in.

The yield on the 10-year JGBs initially rose to 0.080 percent, matching a 10-week high hit earlier this month, but it slipped back to 0.070 percent, flat on the day.

The yield has been on an uptrend after it had bottomed out at minus 0.015 percent in early September on relief that North Korea did not conduct military actions that would have provoked the White House further.

Abe's election victory on Sunday also reduced uncertainty, as many investors expect him to be in a position to install a proponent of aggressive monetary easing when Bank of Japan Governor Haruhiko Kuroda's current term ends in April next year.

Thus, many investors see current yields as attractive given that the BOJ, which has pledged to keep the yield around zero percent, is likely to try to stem the rise in the yield beyond 0.10 percent.

"Under the BOJ's yield curve control policy, it is quite difficult for the 10-year yield to just touch the 0.1 percent. Any rise beyond the current level will be slow," said Yusuke Ikawa, strategist, BNP Paribas.

The 10-year JGB futures started 0.10 point lower before erasing the losses to trade at 150.34, up 0.03 point.

The 20-year yield rose 0.5 basis point to 0.605 percent, matching a three-month high hit last week, while the 30-year yield rose 0.5 basis point to 0.890 percent. (Reporting by Tokyo Markets Team; Editing by Sherry Jacob-Phillips)