JGBs fall on equities rise, issuance concerns

* JGBs extend losses after weak 20-year debt auction

* Investors shy away from new debt due to issuance worries

* Finmin says govt to issue more debt to cover tax shortfall

* Gains in equities also dent JGBs

TOKYO, Oct 20 - Japanese government bonds fell on Tuesday, with the 20-year yield hitting a two-month high, as investors shied away from buying newly auctioned paper while they awaited details on the government's plans to increase bond issuance.

Finance Minister Hirohisa Fujii said the government would sell more bonds to cover an expected tax revenue shortfall for the fiscal year ending in March 2010.

Fujii said tax revenues for the current fiscal year may fall below 40 trillion yen ($441 billion), more than 6 trillion yen below an initial estimate.

Market players have been well aware of the likelihood that the government would have to increase debt issuance to institutional investors to offset a tax revenue shortfall, and also to make up for weak household demand for JGBs.

But investors probably feel little need to rush to buy JGBs until specifics regarding such expected increases to issuance become available, said a trader for a European brokerage house.

"It's the type of situation where investors tend to shy away," the trader said.

The 20-year JGB yield rose 3.5 basis points to a two-month high of 2.125 percent.

The benchmark 10-year JGB yield climbed 1.5 basis points to a one-month high of 1.350 percent.

December 10-year JGB futures fell 0.21 point to 138.62.

A rise in Tokyo share prices added to pressure against JGBs, which have retreated since rallying in early October.

Market players may have gotten carried away with the rally in JGBs earlier this month, and an accumulation of long positions at that time may be one reason why demand for JGBs has been weak over the past couple of weeks, said a trader for a major Japanese bank.