TOKYO, Feb 29 (Reuters) - Japanese government bond (JGB) yields rose on Thursday after Bank of Japan (BOJ) board member Hajime Takata called for an overhaul of ultra-easy monetary policy, strengthening market expectations that normalisation is imminent.
Takata said measures that should be under consideration include an exit from yield curve control (YCC), negative interest rates and a tweak to the BOJ's commitment to keep expanding its monetary base until inflation stably exceeds 2%.
The benchmark 10-year government bond rose 2 basis points (bps) to a one-week high of 0.715%.
While the JGB market has already priced in an exit from negative interest rates at the bank's March or April meeting, Thursday's remarks seemed to give further confirmation, Makoto Suzuki, senior bond strategist at Okasan Securities, said.
"The market is probably more uncertain about whether the BOJ will be able to raise its policy rate gradually this year, or if ending negative interest rates will be all they can do."
Sources familiar with the BOJ's thinking say the central bank is on track to exit from negative rates in coming months.
A majority of economists polled by Reuters this month said they believe Japan's central bank will end its super easy policy at its April meeting.
With imminent policy normalisation priced in, a sale of two-year JGBs on Thursday saw somewhat lukewarm demand, despite the yield - which moves inversely to prices - sitting at its highest in over a decade.
The auction received bids worth 3.62 times the amount sold, lower than the bid-to-cover of 3.74 at the previous auction for the bond. A lower bid-to-cover ratio suggests weaker demand.
The two-year JGB yield was last up 2 bps at 0.180%, hitting its highest since May 2011 after the auction.
The five-year yield sat 2.5 bps higher at 0.370%, after touching a near three-month peak of 0.380%.
The 20-year JGB yield rose 1.5 bps to 1.460%, while the 30-year JGB yield climbed 3 bps to 1.755%. (Reporting by Brigid Riley; Editing by Mrigank Dhaniwala)
