Nov 9 (Reuters) - The Bank of Japan (BOJ) will likely step up its purchases of Japanese government bonds (JGB) if the benchmark yield exceeds 1.0% in the near-term, former policymakers and investors said.

They expect the central bank to gradually continue exiting its ultra-easy monetary policy, calling last week's adjustment of its yield curve control (YCC) policy a step towards normalisation of its monetary framework.

The benchmark 10-year JGB yield sank to a three-week low of 0.830% but another surge in long-term U.S. rates could push the yield above 1%.

Former BOJ board member Takahide Kiuchi believes the central bank may not "tolerate" a rise in yields exceeding +1.2%, placing the medium- to long-term "equilibrium level" of the 10-year JGB yield at around +0.8%.

"If the 10-year government bond yield exceeds +1.0% in the near future, the Bank of Japan will increase its purchases of government bonds and carry out operations to suppress the rise in yields," said Kiuchi, executive economist at Nomura Research Institute.

The BOJ intervened in the government bond market post-policy last week to rein in a jump in yields to decade highs of 0.970%, a level last seen in May 2013.

Carie Li, global market strategist at DBS Bank Treasury and Markets, said if JGB yields were to rise more rapidly than Japan's nominal gross domestic product growth rate, it could pose a risk to the stability of public debt dynamics.

"So expect them to still actively purchase JGB to control the yield," she told the Reuters Global Markets Forum (GMF).

Another former BOJ board member, Goushi Kataoka, said allowing long-term interest rates to rise above 1% increases the overall shape of the yield curve.

"The Bank of Japan is likely to purchase long-term government bonds, albeit less than in the past, in order to maintain the 'appropriate shape of the yield curve'," said Kataoka, chief economist at PwC Japan.

POLICY NORMALISATION

Kataoka also said he saw the BOJ's adjustment of the yield curve last week as the next step towards the end of its negative interest rate policy (NIRP), but added it would be difficult for the central bank to further tighten monetary policy "unless a favourable cycle between prices and income can be confirmed".

The BOJ has repeatedly pointed to sustainable pay increases as one of the prerequisites for unwinding its ultra-loose policy, but Governor Kazuo Ueda said on Wednesday the central bank did not necessarily need to wait until inflation-adjusted wage growth turns positive.

The 2024 "shunto" spring wage negotiations will be important but not the "sole" factor for the BOJ to exit ultra-easy policy, Kiuchi said.

"I don't think the Bank of Japan will make any major policy adjustments before next April," Kiuchi said, adding that he expected the BOJ to exit its NIRP in the second half of 2024.

Robert Samson, joint head of global multi-asset at Nikko Asset Management, expected policy "normalisation" to take a long time, saying the BOJ would continue to intervene in the JGB market "like before".

"If 10-year treasuries break-through 5%, it will be hard for the BOJ to stay firm," Samson said. (Join GMF, a chat room hosted on LSEG Messenger, for live interviews: https://tinyurl.com/yyr3x6pu)

(Reporting by Divya Chowdhury and Anisha Sircar in Bengaluru; Editing by Robert Birsel)