JGBs mostly steady as Fed softens tightening bias

TOKYO, March 22 (Reuters) - Japanese government bond futures dipped slightly on Thursday as a rise in Tokyo share prices offset the positive impact of a softening in the U.S. Federal Reserve's bias toward higher interest rates.

The U.S. Federal Reserve held interest rates steady at 5.25 percent on Wednesday and said it remained uneasy about inflation, but dropped an explicit reference to the possibility of taking rates higher, leaving its options open.

Activity was quiet overall, with turnover sluggish as traders returned from a Japanese holiday on Wednesday, and as many investors stuck to the sidelines before closing their books for the year on March 31.

"There is now a possibility of the Fed cutting interest rates but share prices are higher, so the overall impact is neutral," said Chotaro Morita, interest rate strategist for Deutsche Securities.

But in the end, the Fed's decision to soften its tightening bias may end up having a positive impact on global risk assets such as equities and temper gains in JGBs, Morita said.

June 10-year JGB futures inched down 0.02 point to 134.78 2JGBv1 as of 0108 GMT.

The JGB market was closed on Wednesday for a national holiday. June futures had closed at 134.80 on Tuesday.

The benchmark 10-year JGB yield was flat at 1.560 percent JP10YTN=JBTC, matching a one-year low struck on Tuesday as pension funds and others picked up longer-dated bonds.

U.S. Treasuries rose on Wednesday after investors interpreted the Federal Reserve's policy statement as signaling its next move may be to cut interest rates.

In the stock market, the Nikkei share average rose around 1.7 percent .N225 in early trade.