JGB yields fall as BOJ's rate rise prospects ease amid yen's strength

TOKYO, Sept 11 (Reuters) - Japanese government bond (JGB) yields fell on Wednesday, tracking U.S. Treasury yields lower, as the prospects for the Bank of Japan's potential interest rate increase eased amid a stronger yen and declines in oil prices.

The 10-year JGB yield fell 4 basis points (bps) to 0.85%. The five-year yield fell 3 bps to 0.49%.

"U.S. Treasury yields fell, which put a downward pressure on JGB yields," said Naoya Hasegawa, chief bond strategist at Okasan Securities.

"Also the yen was strengthening and the oil traded lower, which reduces inflation risks. That has eased expectations for the BOJ's interest rate increases."

The yen hit its highest since the start of the year against the dollar in Asia trade, while global oil benchmark Brent crude futures settled at their lowest level since December 2021 before rebounding.

The market did not react to remarks from BOJ policymaker Junko Nakagawa, who said earlier in the day the central bank would continue to raise rates if inflation moves in line with its forecast.

Strategists said the BOJ's regular bond buying witnessed a healthy demand for JGBs, which also helped lift sentiment.

The two-year JGB yield fell 1.5 bps to 0.375%.

The 20-year JGB yield fell 3 bps to 1.670%.

The 30-year JGB yield fell 1.5 bps to 2.050%.

The 40-year JGB yield fell 1 bp to 2.315%.

(Reporting by Junko Fujita; Editing by Rashmi Aich)