JGB yields edge up as strong inflation data raises BOJ's rate hike bets

TOKYO, March 21 (Reuters) - Japanese government bond (JGB) yields edged up on Friday, as stronger-than-expected domestic inflation data raised bets for the Bank of Japan's interest rate hikes.

The 10-year JGB yield JP10YTN=JBTC rose 0.5 basis point (bp) to 1.520% and the five-year yield JP5YTN=JBTC rose 1 bp to 1.12%.

Japan's core inflation hit 3% in February and an index stripping away the effect of fuel rose at the fastest pace in nearly a year, a sign of broadening price pressure that reinforces market expectations of further interest rate hikes.

The data came in the wake of BOJ Governor Kazuo Ueda's warning - made after its decision to keep interest rates steady on Wednesday - that rising food costs and stronger-than-expected wage growth could push up underlying inflation.

"The market has mixed views about the BOJ's rate hike path. Governor Ueda did not rule out the possibility of the early rate increase after the policy meeting last week," said Takahiro Otsuka, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

But at the same time, he warned about uncertainties in the global economy due to the impact of U.S. President Donald Trump's trade policies, he said.

"The yields cannot move in one direction right now," Otsuka said, pointing to the retreat of the 10-year JGB yield from the session high of 1.53% to 1.52%.

The two-year JGB yield JP2YTN=JBTC rose 0.5 bp to 0.84%.

The 20-year JGB yield JP20YTN=JBTC fell 0.5 bp to 2.265% and the 30-year JGB yield JP30YTN=JBTC fell 0.5 bp to 2.59%

The 40-year JGB yield JP40YTN=JBTC rose 0.5 bp to2.965%.