* BOJ buying, smooth 5-year sale reassures market * Yields face upward pressure from stocks, yen -strategist By Lisa Twaronite TOKYO, May 17 (Reuters) - Japanese government bond prices rose on Friday for a second day after a four-session plunge, bolstered by the Bank of Japan's asset-buying operations and reassured by the previous session's solid five-year sale. The BOJ offered to buy outright 600 billion yen ($5.88 billion) in JGBs with residual maturities of more than 5 years and up to 10 years, and another 700 billion yen with residual maturities of more than 1 year and up to 5 years. Still, many strategists believe that with the central bank buying an amount equivalent to 70 percent of new issuance, the market will be chronically choppy and yields will face upward pressure. "A degree of stability has returned to the JGB market since yesterday, as prices found support, and the 5-year auction proceeded smoothly," said Tomohisa Fujiki, interest rate strategist at BNP Paribas in Tokyo. "But looking at the overall picture, if the yen keeps falling and stocks keep rising, and then if the U.S. Federal Reserve starts to think about slowing its bond-buying and U.S. rates rise, there are still many factors that could put upward pressure on JGB yields going forward," he said. Japanese Finance Minister Taro Aso told parliament on Friday that it is desirable for currency markets to be stable, and that the Bank of Japan was taking various steps in response to the rise in long-term rates. The yield on the 10-year cash bonds fell 4.5 basis points to 0.795 percent. On Wednesday, it rose as high as 0.920 percent, its highest level in over a year. The 10-year JGB futures contract ended up 0.42 point at 142.69 after rising as high as 142.85 in the morning session. The five-year bond was higher after solid demand at a sale of that maturity on Thursday, its yield falling 2 basis points to at 0.370 percent after it fell as low as 0.355 percent early in the session. Five-year yields hit a two-year high of 0.455 percent on Wednesday. "Yesterday's 5-year auction was reassuring, but the supply/demand situation is still very unclear," said a fixed-income fund manager at a Japanese asset management firm in Tokyo. Data released early on Friday that showed Japanese core machinery orders jumped a bigger-than-expected 14.2 percent in March, the quickest monthly pace in eight years. While the JGB market had no immediate reaction to the data, mounting evidence of improvement in the Japanese economy will erode demand for the safety of fixed-income assets. The BOJ will hold a regular policy meeting on Tuesday and Wednesday next week, at which it is likely to stand pat. It might front-load bond purchases or offer funds via market operations more frequently if the bond market turbulence persists, which are technical steps that can be taken by its bureaucrats without approval by the nine-member board.