JGB futures rise on Treasuries, Nikkei

*JGBs attract safe-haven bids as Nikkei falls

*Deterioration in business sentiment also supports JGBs

*Upcoming Fed meeting, Japan CPI caps bonds' upside

By Shinichi Saoshiro

TOKYO, June 23 (Reuters) - Japanese government bond futures rose on Monday, lifted by a rally in U.S. Treasuries late last week and a sharp slide in equities.

JGBs also drew support from the results of the Ministry of Finance's corporate mood survey released on Monday, which showed that Japanese firms' sentiment on business conditions hit a four-year low in the April-June quarter. [ID:nT145051]

"The survey was basically in line with the forecasts released last week for the Bank of Japan's tankan, so it will not cause a major shift in sentiment," said Tatsuo Ichikawa, fixed-income strategist at ABN AMRO Securities.

But the MOF survey supported JGBs as it revealed how inflation was affecting corporate sentiment, he said.

September 10-year JGB futures rose 0.59 to 134.09 1JGBv1.

The benchmark 10-year yield JP10YTN=JBTC fell 4 basis points to 1.715 percent.

The MOF survey showed that the headline business survey index (BSI) of sentiment for the April-June quarter had fallen to a four-year low of minus 15.3.

The result underlined analysts' views that the BOJ's closely watched tankan survey due on July 1 will show a further slide in corporate sentiment.

"Higher raw material prices are dampening the (corporate and consumer) mood, and downside risks to the economy warrant careful attention. So I think the BOJ's current policy stance is appropriate," said Takeshi Minami, chief economist at Norinchukin Research Institute.

The BOJ has left monetary policy unchanged since February 2007, when it lifted rates by a quarter point to 0.5 percent.

But the market was wary of driving JGB prices up further ahead of key events this week, traders said.

Of particular interest to market participants is how the Federal Reserve will signal its stance on monetary policy after a two-day meeting that ends on Wednesday.

Japanese inflation data due on Friday will also be in the spotlight, with the impact of a reinstated provisional gasoline tax and its impact on the May nationwide CPI in focus.

The 20-year yield JP20YTN=JBTC was 2.5 basis points lower at 2.285 percent.

The five-year yield JP5YTN=JBTC dropped 5.5 basis points to 1.295 percent.

The two-year yield, the most sensitive to shifting perceptions in monetary policy, declined 2.5 basis points to 0.850 percent JP2YTN=JBTC.

The Nikkei stock average .N225 fell 1.1 percent on Monday after rising oil prices prompted a sharp decline on Wall Street late last week.

Treasuries soared on Friday, boosted by falling stocks and concerns about the health of the financial sector. (Editing by Chris Gallagher)