Benchmark JGB yields climb as markets anticipate BOJ hike

(Updates yield levels)

By Rocky Swift

TOKYO, Dec 12 (Reuters) - Yields on benchmark Japanese government bonds (JGBs) rose on Friday as markets anticipated an interest rate hike by the central bank next week.

The 10-year JGB yield rose 2.5 basis points (bp) to 1.95% on Friday, still down from an 18-year high of 1.97% touched on Monday. The yield is poised to finish this week unchanged after climbing for five straight weeks. Yields move inversely to bond prices.

Shorter-term JGBs, those particularly sensitive to central bank policy, have been on a downward trajectory recently on hints by the Bank of Japan that it was preparing to raise its key policy rate to tame inflation and stem depreciation in the yen.

Longer-dated bonds have also been under pressure, driving yields to historic levels, following Prime Minister Sanae Takaichi's announcement of massive stimulus that will be funded largely by new debt.

"Facing the market constraints of a falling yen and rising interest rates, the Takaichi administration is also reportedly willing to accept a rate hike despite its reflationary policy stance," Yusuke Matsuo, senior market economist at Mizuho Securities, said in a note. "We therefore see almost no remaining obstacles to BOJ consideration of a rate hike."

The central bank is likely to continue increasing its key rate once every six months, consistent with the pace of tightening up until the United States rattled global economies with sweeping tariffs in April, Matsuo said.

The two-year JGB yield rose 1.5 bps to 1.065%, while the five-year yield also increased by 1.5 bps to 1.435%.

Super-long-term bonds rallied, with the 30-year yield felling 2.5 bps to 3.355%, and the 40-year yield declining 3.5 bps to 3.67%. (Reporting by Rocky Swift; Editing by Subhranshu Sahu)