JGBs rise after weak data, await U.S. bank tests

* JGB futures erase early losses to touch highest in a week

* Japan's core March CPI -0.1% y/y, jobless rate at 4-yr high

* Eyes on U.S. financial system, auto industry

By Kaori Kaneko

TOKYO, May 1 (Reuters) - Japanese government bonds rose on Friday as weak economic data prompted investors to hunt for bargains, but trade was subdued with many players away before a string of public holidays.

Japan edged back into deflation for the first time in more than a year, March consumer price data showed, while the unemployment rate hit a four-year high and the availability of jobs slid to its lowest in seven years.

"Japan's data overall today was weaker than expected, prompting investors to buy on dips," said Naomi Hasegawa, senior fixed-income strategist at Mitsubishi UFJ Securities.

"Some of Japan's data such as exports and industrial production may have passed their worst period but labour market and inflation data may show even worse figures in coming months. So the JGB market showed a solid tone on a tug-of-war of mixed figures," she said.

The core consumer price index fell 0.1 percent in March from a year earlier, putting Japan in its second round of deflation in less than two years, and the jobless rate rose to 4.8 percent. [JPCPI=ECI] [JPUNR=ECI]

Data on Thursday had shown a bigger-than-expected rise in industrial production, signalling Japan's plunge in output and exports may be nearing an end. [JPIP1=ECI]

Lead June 10-year JGB futures were up 0.28 point at 137.27 2JGBv1 after touching a one-week high of 137.34.

The benchmark 10-year JGB yield fell 1.5 basis points to 1.405 percent JP10YTN=JBTC and the 20-year yield slipped 0.5 basis point to 2.005 percent JP20YTN.

The five-year yield dropped 1.5 basis points to 0.795 percent JP5YTN=JBTC.

While Japanese financial markets closed Monday-Wednesday for the Golden Week holiday, players will be looking to further developments in the U.S. financial system and auto industry, traders said.

U.S. regulators have stress-tested the 19 largest U.S. banks to determine their capital needs should economic conditions deteriorate further. The announcement of the results has been pushed back, possibly to May 6, a source familiar with the matter said on Thursday. [ID:nN30527288]

A delay in the disclosure of the results has added uncertainty to the banks' situation, underpinning the JGB market, dealers said.

Investors will also be focusing on the fate of struggling General Motors Corp GM.N after Chrysler LLC filed for bankruptcy on Thursday, they said. [ID:nLU940906] (Reporting by Kaori Kaneko; Editing by Chris Gallagher)