JGB futures drop as Nikkei jumps, Treasuries slide

By Rika Otsuka

TOKYO, April 11 (Reuters) - Japanese government bond futures fell on Friday, tracking an overnight slide in U.S. Treasuries, while a jump in Tokyo stocks took the shine off the appeal of safe-haven government debt.

Some market players also locked in profits on a rise in futures the previous day before a meeting of Group of Seven finance leaders starts later in the day in Washington.

But trading was quiet overall as many investors retreated to the sidelines, waiting to see if the G7 economic powers unveil new steps to ease the global credit crisis.

Investors were also reluctant to pick up JGBs after the appointment of new Bank of Japan Governor Masaaki Shirakawa earlier this week cooled expectations that the central bank might cut interest rates later this year.

"It's no surprise to see JGBs suffering as rate cut speculation has shrunk before the G7 meeting," said Mari Iwashita, senior market economist at Daiwa Securities SMBC.

The market now expects the BOJ to stand pat for a while given Shirakawa's reputation that he pays deep respect to economic fundamentals in policy-making, while he is unlikely to yield to any external pressure.

June 10-year futures were down 0.56 point at 139.52 2JGBv1 as Tokyo's Nikkei share average .N225 climbed 1.8 percent .N225 in midmorning trade.

The benchmark 10-year JGB yield rose 4 basis points to 1.370 percent JP10YTN=JBTC, crawling towards a one-month high of 1.380 percent hit last week.

BOJ data showed on Friday that Japanese wholesale prices rose a more-than-expected 3.9 percent in March from a year earlier, further evidence that companies' profits are being squeezed in the face of rising oil and other raw materials prices. [JPCGPY=ECI]

Still, the JGB market was little moved by the data.

Treasuries fell on Thursday as traders favoured stocks over government bonds after a handful of upbeat earnings forecasts overshadowed the gloomy outlook for the U.S. economy. (Editing by Chris Gallagher)