JGB futures rise as BOJ economic verdict awaited

* Futures rise and recover from Friday's near full-point drop

* Global economic worries and Treasuries give support

* BOJ expected to downgrade view of economy

By Satomi Noguchi

TOKYO, Aug 18 (Reuters) - Japanese government bond futures rose on Monday as worries about global economies outside the United States kept views intact that the Bank of Japan will keep interest rates steady in the coming months.

The market also drew support from gains in U.S. Treasuries late last week after falling energy prices reduced fears of inflation. [US/]

Futures climbed towards a four-month high, recovering from Friday's near full-point fall on profit-taking by foreign accounts in a holiday-thinned market.

Activity was expected to resume as many investors were returning from Japan's "obon" summer holidays and will focus on the BOJ's two-day policy meeting starting from Monday.

The BOJ is expected to downgrade its view of the economy and keep interest rates on hold at 0.5 percent after data last week confirmed Japanese economy shrank in the second quarter. [ID:nT123416]

That was followed by data showing the euro zone economy also shrank in the second quarter, in contrast with the U.S. economy, which expanded in the same period.

"The market may even start to speculate on chances of a rate cut on BOJ's downgrading its view on the economy, and that may become a psychological factor to push JGB yields lower," said Jun Ishii, a chief fixed-income strategist at Mitsubishi UFJ Securities, in a note to clients.

September futures 2JGBv1 rose 0.06 point to 137.75, in sight of a four-month high of 138.12 hit last week. The lead contract had tumbled as low as 136.90 on Friday.

The benchmark 10-year yield JP10YTN=JBTC edged down half a basis point to 1.450 percent, near a four-month low of 1.415 percent touched last week.

The five-year yield inched down half a basis point to 1.015 percent JP5YTN=JBTC as the market awaits an auction in the maturity later in the week.

Money market futures JPONIBOJ=TRDT suggest investors do not see a rate hike within the year, and are not expecting a rate cut either. (Editing by Michael Watson)