TOKYO, Dec 8 (Reuters) - Japan's 10-year government bond yield hit a three-week high on Friday on growing speculation that the Bank of Japan (BOJ) would end its negative interest rate policy soon.
The 10-year JGB yield climbed as high as 5 basis points (bps) to 0.8% earlier in the session, its highest since Nov. 16, following a 10.5 bps jump in the previous session, its biggest single-session increase since April 2013.
BOJ Governor Kazuo Ueda said on Thursday the central bank anticipates an "even more challenging" situation in the year-end and the beginning of next year.
"Ueda said there is a challenge at the end of the year, which drove a speculation that the BOJ may end its negative rate policy at its meeting later in the month," said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.
The BOJ governor's comments came as some economists and strategists expect the central bank to end its negative rate policy as early as January, with inflation exceeding the central bank's 2% target for well over a year.
Ueda visited Prime Minister Fumio Kishida after he made the remarks, which also helped the yen surge to a multi-month high against the dollar, extending its rally on Friday.
The 10-year bond yield retreated later in the session, last at 0.77%, as investors bought back the bonds on dips.
"What is expected so far is the timing for the BOJ to end its negative policy. There is no clear view on how the BOJ will raise the rate to positive going forward," said Takafumi Yamawaki, head of Japan rates research at J.P. Morgan Securities.
The yield swung sharply this week, rising as much as 18 bps, after hitting a three-and-a-half month low of 0.62% on Wednesday.
Yields on other maturities fell from their day's highs, with the 5-year yield last at 0.35% after jumping to 0.385%, while the 20-year JGB yield was at 1.54%, down from 1.57%. (Reporting by Junko Fujita; Editing by Christopher Cushing, Dhanya Ann Thoppil and Mrigank Dhaniwala)
