TOKYO, Jan 26 (Reuters) - Japanese government bond yields fell on Friday as core inflation in the capital Tokyo slowed below the Bank of Japan's 2% target, lowering expectations for an early policy shift.
The core consumer price index (CPI) in Tokyo, a leading indicator of nationwide inflation trends, rose 1.6% in January from a year earlier, the lowest rate in nearly two years.
The 10-year JGB yield fell 3.5 basis points (bps) to 0.71%. The five-year yield fell 3.5 bps to 0.29%.
"There were some factors that pushed the yields down. The CPI was one," said Naoya Hasegawa, senior bond strategist at Okasan Securities, adding that Japanese yields also tracked U.S. peers' fall overnight.
"And it was time for JGB yields to fall after rising sharply this week."
The JGB yields jumped to their highest level in more than a month this week after BOJ Governor Kazuo Ueda said the chance of meeting the country's inflation goal was rising, driving bets for a policy shift.
The BOJ has kept its negative rate policy unchanged even as Japan's inflation exceeded its 2% inflation target for more than a year.
Many market players expect the central bank to end the ultra-loose policy as early as March.
Yields across the curve fell, with the 20-year JGB yield slipping 3 bps to 1.525% and the 30-year JGB yield falling 2 bps to 1.810%.
The two-year JGB yield fell 1.5 bps to 0.045%.
Benchmark 10-year JGB futures rose 0.4 yen to 146.37.
(Reporting by Junko Fujita; Editing by Eileen Soreng)
