UPDATE 1-Japan:G8 finmins unlikely to single out bond yields

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* G8 finmins may discuss exit from unusual steps - Japan MOF

* Japan MOF: US unlikely to ask others to conduct stress tests

TOKYO, June 10 (Reuters) - A senior official at Japan's Ministry of Finance said on Wednesday that Group of Eight finance ministers are unlikely to single out the issue of rising bond yields when they meet this weekend in Italy.

Yields on government bonds in Japan, the United States and Europe have been rising as indicators in major economies point to a stabilisation in the economic downturn.

While the finance ministers may discuss exit strategies from the unusual policy steps they have taken to combat the global economic crisis, they won't take up rising bond yields as an unstable factor for the world economy, the official said.

"There are indicators that show bright signs in each country, but the outlook remains unstable. Our basic thinking is to tackle necessary steps to support sustainable economic growth," he said.

The official added, without elaborating, that any failures in these exit strategies could have a negative impact on interest rates.

Yields on two- and 10-year Treasuries hit their highest levels since November on Monday as data suggested the worst may be over for the U.S. economy. Yields on government bonds in Japan and Europe have also been rising as indicators in major economies point to a bottoming out.

The rise in market interest rates presents a problem for the world economy because it could translate into higher borrowing costs for both companies and governments and slow the pace of recovery.

But the Japanese official said: "I don't consider rising bond yields a factor behind the unstable outlook for the economy."

Finance ministers from the Group of Eight leading world powers gather in Lecce in southern Italy on Friday and Saturday to take stock of efforts to combat the global economic crisis, agreed at a G20 summit in London in April.

The G8 comprises the United States, Japan, Germany, France, Britain, Italy, Canada and Russia.

The finance ministers will follow up on topics including reform at the World Bank and the International Monetary Fund, and regulation in the financial sector. They will also discuss issues of food security and climate change ahead of a G8 leaders' summit in Italy in July, the official added.

U.S. Treasury Secretary Timothy Geithner said on Tuesday that he would discuss the U.S. experience with stress-testing the capital levels of banks, but did not plan to judge other countries' standards for examining their banks. [ID:nN09398280]

Canadian Finance Minister Jim Flaherty said earlier that the G8 ministers would continue to apply pressure for stress testing at the weekend talks.

The Japanese official said Washington may explain its stress tests at this weekend's meeting, but it is not in a situation where it will ask other countries to follow suit. (Reporting by Tetsushi Kajimoto; Editing by Hugh Lawson)