TOKYO, Sept 2 (IFR) - Japanese government bond prices dropped on Tuesday, initially pressured by a weaker yen and stronger equities and extending the declines after the results of 10-year sale came in slightly below expectations.

The dollar rose to a high of 104.79 yen, its highest level since January, while the Nikkei stock average surged 1.5 percent.

This morning, the Bank of Japan did not offer to buy JGBs under its massive asset purchase programme, as the Ministry of Finance conducted its monthly 2.4 trillion yen ($22.91 billion US dollar) 10-year JGB auction. MOF set the coupon of the new 10-year JGBs (issue number 335, due Sept. 20, 2024) at 0.5 percent, matching the record lowest level of June 2003.

The MOF this month extended the maturity of the new issue by three months, with the payment date set for Sept. 22, which coincides with a massive quarterly redemption of JGBs.

JGB players widely predicted the 10-year sale would proceed smoothly on expectations that the BOJ would continue to buy JGBs across the curve under its asset purchase program.

The lowest accepted price at the auction was 99.80 to yield 0.521 percent, with 63.463 percent of bids accepted. The bid-to-cover ratio, a measure of demand, was a solid 3.58 times, though below the last sale's 4.29 times.

The tail stemming from the gap between the average and accepted lowest prices also widened to 0.03 from 0.01 at last month's sale.

After the results, the yield on 5-year JGBs was flat at 0.155 percent, while the yield on the current 10-year JGB added one basis point to 0.500 percent, compared to 0.490 percent at midday.

At the end of the morning session, the 20-year and 30-year JGB yields were both up 1.5 basis points at 1.340 percent and 1.640 percent, respectively.

The 10-year lead September JGB futures contract moved down 0.09 point at 146.14, after finishing the morning session flat.

(1 US dollar = 104.7500 Japanese yen) (Reporting by Masatsugu Hisatsune; Editing by Shri Navaratnam)