Japan's shorter-end yields rise as hawkish BOJ comments fan early rate hike bets

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By Junko Fujita

TOKYO, Feb 26 (Reuters) - Japan's shorter-dated bond yields rose on Thursday, reversing the previous session's declines, as hawkish comments from the Bank of Japan officials stoked bets of early interest rate hikes.

The two-year JGB yield rose as much as 3 basis points (bps) to 1.245% and the five-year yield jumped as much as 4 bps to 1.620%.

The move is a stark contrast from Wednesday, when the shorter-end yields fell after the nomination of two academics seen as dovish to the central bank's board fanned bets that the BOJ would delay policy tightening.

Hajime Takata, a hawkish board member, said on Thursday that the BOJ must focus on the risk of inflation overshooting when guiding monetary policy.

His comments followed a local media report in which BOJ Governor Kazuo Ueda left open the chance of a near-term interest hike by saying the bank would scrutinize data at its March and April meetings in its policy decision.

"The market reacted to those remarks and the shorter-dated bond yields rose," said Yuki Kimura, a bond strategist at Okasan Securities.

The yields on super-long ends fell after rising sharply higher in the previous session.

The 30-year yield fell 2 bps to 2.965% and the 40-year bond yield fell 3 bps to 3.605%.

The declines were supported by demand from pension funds which need to rebalance their portfolios at the end of the month, said Kimura.

The 10-year JGB yield rose 1.5 bps to 2.150%.

(Reporting by Junko Fujita; Editing by Sherry Jacob-Phillips and Janane Venkatraman)