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By Kevin Plumberg
HONG KONG, June 6 (Reuters) - Japanese government bond
prices fell on Friday, following a selloff in European and U.S.
bonds the previous day, after the European Central Bank joined
the Federal Reserve this week in expressing unusually candid
concerns about inflation.
ECB President Jean-Claude Trichet jolted markets when he
said higher benchmark interest rates in July were "possible,"
helping to lift the euro to a five-month high against the yen
on Friday as dealers factored in an increasing euro zone bond
yield advantage over other developed economies.
Stronger-than-expected U.S. weekly jobs data also weighed
on government bonds, but helped lift stocks in Asia.
Japan's Nikkei average <> climbed 1.6 percent to a
five-month high, as investors banked their hopes for solid
export growth on the back of a weaker yen and
higher-than-expected sales numbers at major U.S. retailers
including Wal-Mart Stores <WMT.N>.
Australian stocks also rose, bolstered by shares of
resource-related companies after crude prices shot up around $6
overnight as the U.S. dollar weakened against the euro.
"The backup on bonds has been quite aggressive," said
Patrick Bennett, Asian foreign exchange and interest rate
strategist with Societe Generale in Hong Kong.
"These inflation concerns are serious, for sure. We may be
seeing the worst of it over the next three to four months.
Policymakers are trying to address it," he said.
By 0200 GMT, the benchmark 10-year Japanese government bond
yield <JP10YTN=JBTC>, which moves inversely to the price, rose
4.5 basis points to 1.77 percent, near a 10-month high of 1.805
percent reached last week.
The yield on the 10-year U.S. Treasury note <US10YT=RR>
also ticked higher, to 4.0480 percent, within sight of the 2008
high of 4.14 percent.
Japan's Nikkei share average hit its highest since January,
led by clothing company Fast Retailing <9983.T> and ceramic
maker Kyocera Corp <6971.T>.
"Since the begining of this month, top financial officials
in the United States and Europe have made comments that have
provided support to Japanese shares," said Masayoshi Okamoto,
head of dealing at Jujiya Securities.
Remarks by Federal Reserve Chairman Ben Bernanke earlier
this week helped lift the dollar against the yen, one of the
biggest driving factor for export-oriented Japanese stocks.
The MSCI index of Asia-Pacific stocks outside Japan rose
0.9 percent <.MIAPJ0000PUS>, though the measure was on track
for its third consecutive week of declines.
Australia's S&P/ASX 200 <> rose 1 percent, lifted by
heavyweight resource firms such as BHP Billiton Ltd <BHP.AX>
and Woodside Petroleum Ltd <WPL.AX>.
Oil prices <CLc1> crept above $128 a barrel on Friday, as
dealers put aside fears about waning global demand for the time
being and focused on the dollar's weakness against the euro.
The euro held most of its overnight gains against the
dollar, largely unchanged at $1.5588 <EUR=> and hit a peak of
165.61 yen <EURJPY=>, its highest since late December.
The dollar rose for a fourth straight day against the yen,
which still offers among the lowest interest rates in the
industrialised world. Against the yen, the dollar was up 0.2
percent to 106.10 yen <JPY=>.
Before Trichet's remarks on Thursday, Fed Chairman Ben
Bernanke startled markets twice this week with pointed comments
about how the weak dollar is spurring inflation and how
long-term inflation expectations were a "significant concern."
The price of gold <XAU=> firmed in the spot market, ahead
of the May U.S. payrolls report. It rose slightly to $878.60 an
ounce, up 0.5 percent.
(Additional reporting by Taiga Uranaka in Tokyo; Editing by
Lincoln Feast)
