TOKYO, May 24 (Reuters) - Japan's 10-year government bond yield crossed 1% on Friday for the first time in 12 years amid increasing expectations of further Bank of Japan policy tightening.

The 10-year JGB yield inched up 0.5 basis point (bp) to 1.005%, its highest since April 2012.

"Upward pressure on Japanese yields is getting stronger, with overnight rises in overseas yields," said Shinichiro Kadota, head of Japan FX and rates strategy at Barclays Securities Japan.

U.S. Treasury yields gained overnight after data showing persistent strength in the labour market and business activity, reinforcing expectations that the Federal Reserve will take its time cutting interest rates this year. US/]

JGB yields have risen this month on hawkish hints from BOJ officials, including a surprise reduction in the offer amount of bonds with 5-10 years left to maturity at its regular bond buying last week.

The market is bracing for a further reduction in the amounts after the demand for selling bonds with 1-3 years left to maturity to the BOJ was below the central bank's offer on Thursday.

"That will make it easier for the BOJ to reduce the offer amounts for bonds with these maturities going forward," said Kadota.

A failure to draw sufficient sell offers suggests the BOJ's offer is extremely big relative to investor demand, Ataru Okumura, senior strategist at SMBC Nikko Securities, wrote in a report.

The BOJ on Thursday bought 356.4 billion yen ($2.27 billion) of bonds with those maturities against its offer of 375 billion yen, the central bank data showed.

The BOJ will decide to

start tapering

the size of its bond-buying by end-July, according to nearly two-thirds of economists polled by Reuters, while close to 90% forecast an interest rate hike to at least 0.20% by the end of the year.

The two-year JGB yield, highly sensitive to the BOJ's policy, was flat at 0.335%. The five-year yield rose 0.5 bp to 0.585%.

The 20-year JGB yield rose 0.5 bp to 1.855%, while the 30-year JGB yield was flat at 2.160%.

($1 = 157.0800 yen) (Reporting by Junko Fujita; Editing by Clarence Fernandez and Kim Coghill)