Japan's 2-year bond yield hits 16-year high on rate hike bets

TOKYO, Nov 1 (Reuters) - Japan's two-year government bond yield hit a 16-year high on Friday, as bets rose for a Bank of Japan interest rate hike after hawkish comments from the central bank's chief.

The two-year JGB yield rose to 0.47%, its highest since December 2008. It was last up 3.5 bps at 0.465%.

The BOJ maintained ultra-low interest rates on Thursday but said risks around the U.S. economy were somewhat subsiding, signalling that conditions are falling into place to raise interest rates again.

"Comments from Ueda and the backdrop for his comments drove speculation the BOJ would raise its policy rate earlier than expected," said Naoya Hasegawa, chief bond strategist at Okasan Securities.

After the July rate hike, the BOJ had said it could "afford to spend time" scrutinising risks before making policy decision. But on Thursday, Ueda said the central bank would no longer use those words.

"By not using those words, the BOJ opened the door for the next policy shift as early as December," said Hasegawa.

The yields ended lower on Thursday as the market had a mixed interpretation of the BOJ's quarterly report, which mentioned the attention to the future course of overseas economies, particularly the U.S., strategists said.

On Friday, the five-year yield rose to 0.605%, its highest since Aug. 2. It was last up 2.5 bps at 0.59%.

The 10-year JGB yield rose 1.5 bps to 0.95% and the 20-year JGB yield rose 1 bp to 1.785%.

The 30-year JGB yield was flat at 2.205%.

The 40-year JGB yield was flat at 2.545%. (Reporting by Junko Fujita; Editing by Subhranshu Sahu)