By Masayuki Kitano

TOKYO, Nov 4 (Reuters) - Ten-year Japanese government bond futures edged lower on Wednesday as traders returned from a holiday, taking their cue from falls in U.S. Treasuries over the past couple of trading sessions.

Cash JGBs mostly eased, although the benchmark 304th 10-year bucked the trend and held firm, with market players saying the benchmark bond was in demand in the JGB repo market, where dealers can borrow bonds in exchange for cash.

Moves in JGBs were subdued overall, with market players awaiting the U.S. Federal Reserve's policy decision later on Wednesday and a 10-year JGB auction on Thursday.

'It is not as if people are trying to sell or buy very actively. The market is a bit weak because of the declines in U.S. Treasuries,' said Shinji Ebihara, a quantitative analyst for Mizuho Securities.

Lead December 10-year JGB futures dipped 0.12 point from their close on Monday to 138.15. The Tokyo JGB market was closed on Tuesday due to a Japanese national holiday.

The benchmark 304th 10-year JGB dipped 1 basis point to 1.365 percent.

The 304th 10-year JGB may be attracting more demand from investors compared to other bonds with similar maturities because it is the newest issue, and that may be why that particular bond is in demand in the repo market, said Ebihara at Mizuho Securities.

Yields in other JGB maturities inched higher, with the 20-year yield edging up 1 basis point to 2.100 percent and the five-year yield clawing up 0.5 basis point to 0.650 percent.

U.S. Treasuries have fallen this week, hurt by a stronger-than-expected reading in the Institute for Supply Management's factory index and as traders prepared for Wednesday's Treasury refunding announcement and a Federal Reserve policy decision.

JGBs have had some reprieve this month after they were sold off in October, when they retreated on worries about the size and details of debt issuance for the rest of this fiscal year and next.

The benchmark 10-year JGB yield climbed 11 basis points in October, its biggest one-month rise since May 2008, and hit a 2-½ month high of 1.425 percent last Friday.

The MOF said last week that it would increase its issuance of JGBs to the market for the fiscal year to March 2010 by 2.1 trillion yen ($23.23 billion) to 132.3 trillion yen, to offset weak demand for JGBs among retail investors.

Investors are bracing for the possibility of further increases in debt issuance this fiscal year to offset an expected tax revenue shortfall, although some analysts reckon that the bulk of any extra issuance to the market may be concentrated in short-term JGBs.

Japanese Finance Minister Hirohisa Fujii reiterated on Wednesday that the government would issue extra bonds to respond to a sharp fall in tax revenues in the year to next March.

Fujii had already said the government could issue more bonds for the fiscal year to next March as tax revenues are likely to fall 6 trillion yen ($66 billion) or more below an initial estimate of 46 trillion yen.

There is also uncertainty about the size and details of JGB issuance to the market next fiscal year, which starts in April.

($1=90.38 Yen) ((masayuki.kitano@thomsonreuters.com; Reuters Messaging: masayuki.kitano.reuters.com@reuters.net; +81-3-6441-1872)) Keywords: MARKETS JAPAN JGB

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