Japan's short-term bond yields recover slightly after hawkish BOJ remarks

By Junko Fujita

TOKYO, Feb 13 (Reuters) - Yields on short-term Japanese government bonds recovered some early losses on Friday, following remarks from a hawkish Bank of Japan board member, as the market reacted to the prospect of tighter policy.

The benchmark 10-year JGB yield JP10YTN=JBTC fell 1 basis point (bp) to 2.22%, after initially dipping as much as 3.5 basis points at 2.195% earlier in the session. The five-year yield JP5YTN=JBTC was down 1 bp at 1.69%.

BOJ board member Naoki Tamura said that he sees a good chance of the country durably achieving its 2% inflation target by around spring this year.

"His comments were within market expectations, but those became a cue for selling bonds," said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management.

Tamura, a former commercial bank executive, was one of the two board members who unsuccessfully proposed raising the BOJ's short-term policy rate in October. At a subsequent meeting in December, the central bank raised the rate to 0.75% from 0.5%.

The two-year yield JP2YTN=JBTC was last down 1.5 bps at 1.285%. It rose as high as 1.295% right after the speech.

Yields move inversely to bond prices.

Yields on super-long-dated bonds rose on Friday after sharp declines this week, with the 30-year yield JP30YTN=JBTC rising as much as 3.5 bps to 3.060%. The yield on the 40-year JGB JP40YTN=JBTC also climbed 3.5 bps to 3.665%.

Yields of super-long-dated bonds fell sharply after Prime Minister Sanae Takaichi's Liberal Democratic Party won a landslide victory in a snap election on Sunay as concerns over fiscal health eased.