Japan bond yields rise as Middle East tensions escalate

By Satoshi Sugiyama

TOKYO, March 13 (Reuters) - Yields on Japanese government bonds (JGBs) climbed on Friday, driven by higher crude oil prices and a weaker yen as tensions in the Middle East escalated, stoking inflation concerns.

The benchmark 10-year JGB yield JP10YTN=JBTC rose 3.5 basis points (bps) to 2.215% while the five-year yield JP5YTN=JBTC rose 2.5 bps to 1.650%. Yields move inversely to bond prices.

"Rising expectations for higher crude oil prices and the yen's weakness, against the backdrop of concerns that heightened tensions in the Middle East will be prolonged, are likely to weigh on the market," Kazuya Fujiwara, bond strategist in Mitsubishi UFJ Morgan Stanley Securities, said in a note.

He added trading is expected to gradually turn directionless after initial selling runs its course.

U.S. Treasury yields rose overnight over concerns about resurgent inflation from the U.S.-Israeli war on Iran that could keep U.S. interest rates higher for longer. US/

The 20-year JGB yield JP20YTN=JBTC climbed 2 bps to 3.080%. The 30-year yield JP30YTN=JBTC added 1.5 bps to 3.485%.

The two-year yield JP2YTN=JBTC, most sensitive to Bank of Japan policy rates, and the 40-year JGB JP40YTN=JBTC, Japan's longest tenor, had not yet changed in price, as of 0202 GMT.