JGB 10-year yields hit 14-year highs as BOJ outlook weighed

By Kevin Buckland

TOKYO, Jan 10 (Reuters) - Benchmark Japanese government bond yields rose to the highest level in nearly 14 years on Friday, on rising odds for an interest rate increase at the Bank of Japan's policy meeting this month.

The 10-year JGB yield advanced 1.5 basis points to 1.195% as of 0533 GMT, a level not seen since May 2011.

The Bank of Japan in a report released on Thursday said wage hikes are broadening in the country, suggesting that conditions for a near-term rate hike were continuing to fall into place.

The BOJ has repeatedly said that sustained and broad-based wage hikes are a prerequisite to raise short-term interest rates from the current 0.25%, a move some analysts bet could come at the conclusion of its next monetary policy meeting on Jan. 24.

"JGB yields are likely to rise further as the BOJ's January meeting gets closer," said Norihiro Yamaguchi, senior Japan economist at Oxford Economics.

Although investors "are still half in doubt" about the chances of a hike in two weeks' time, the central bank's report on Thursday "generally seems to provide one notch more evidence to persuade the board to conduct a rate hike", the economist said.

Yamaguchi and other market participants will be watching closely for further clues when BOJ Deputy Governor Ryozo Himino gives a speech on Tuesday next week.

Before that, the focus will be on U.S. monthly payrolls figures later on Friday for indications of the pace of Federal Reserve rate cuts this year.

A surge in U.S. Treasury yields to multi-month highs mid-week has pushed Japanese yields higher.

The 20-year JGB yield rose 1 bp to 1.945%, while the newly issued 30-year bond yield rose 0.5 bp to 2.285%.

The five-year note yield gained 1 bp to 0.815% while the two-year yield was flat at 0.64%.

Benchmark 10-year JGB futures fell 0.24 yen to 141.07 yen. (Reporting by Kevin Buckland; Editing by Mrigank Dhaniwala)