JGB yields hit multi-year highs as BOJ chief's comments drive rate hike bets

TOKYO, Jan 15 (Reuters) - Japanese government bond yields hit multi-year highs on Wednesday, after Bank of Japan (BOJ) Governor Kazuo Ueda's comments drove expectations for a rate hike this month.

The two-year JGB yield, which is more sensitive to interest rate expectations, rose 2 basis points (bps) to 0.7%, its highest since October 2008.

The 10-year yield rose 1.5 bps to 1.255%, its highest level since April 2011.

"The yields on shorter-ended bonds rose, which indicated that expectations that the BOJ would raise its policy rate at its meeting next week grew after BOJ Governor's comments," said Miki Den, senior Japan rate strategist at SMBC Nikko Securities. The BOJ will raise interest rates and adjust the degree of monetary support if improvements in the economy and price conditions continue, Ueda said on Wednesday. That followed comments from Deputy Governor Ryozo Himino, who on Tuesday said the BOJ would debate whether to raise rates next week as prospects of sustained wage gains heighten and the U.S. policy outlook becomes clearer in President-elect Donald Trump's inaugural address.

While the BOJ is not in a hurry to raise rates, given what those two officials have said, the BOJ seems to have confirmed the momentum it wanted to see in December by now, said Naoya Hasegawa, chief bond strategist at Okasan Securities.

"Whether the BOJ will raise rates next week or not depends on market reaction to (U.S. President-elect Donald) Trump's speech next week," he said.

Swap rates indicated a 70% chance of the BOJ raising its policy rate to 0.5% at the two-day meeting that will conclude on Jan. 24.

The five-year JGB yield rose 2 bps to 0.89%, its highest since April 2009.

The 20-year yield rose 1 bp to 2.015%, its highest since May 2011, ahead of an auction for bonds with the same maturity in the next session.

The 30-year yield rose 2 bps to 2.355%, its highest level since August 2009. (Reporting by Junko Fujita; Editing by Varun H K)