TOKYO, April 10 (Reuters) - Japan's five-year government

bond yields hit a record high at the end of a volatile week of

trade on Friday, as investors gauged government and central bank

responses to economic headwinds brought on by the Middle East

crisis.

The five-year Japanese government bond yield rose

3.5 basis points to 1.86%. The benchmark 10-year yield

advanced 4 bps to 2.43%, matching a 27-year high

reached earlier in the week. Yields move inversely to bond

prices.

Government bond yields have been rising around the world as the

six-week-long war in Iran spiked oil prices and raised inflation

risk, while the ceasefire reached earlier this week remained

fragile. All eyes are on talks in Pakistan this weekend, as the

U.S. and Iran hold their first round of peace talks.

In Japan, expectations are rising that the government will

expand stimulus to support the economy, further straining the

country's already indebted balance sheet. Wholesale inflation

jumped 2.6% in March, data showed on Friday, adding to pressure

on the Bank of Japan to accelerate interest rate hikes.

BOJ Deputy Governor Ryozo Himino said in parliament that the

central bank will guide monetary policy with an eye on the

overall economic impact of the Middle East conflict.

Interest rate swaps on Thursday indicated a 58% chance of a

rate hike this month, slightly higher than the day before,

according to Tokyo Tanshi data.

The two-year yield, the one most sensitive to

BOJ policy rates, increased 1.5 bps to 1.4%.

"Speculation is likely to grow that the BOJ will soon issue

a message if it intends to raise rates in April," Ataru Okumura,

a senior rate strategist at SMBC Nikko Securities, said in a

note. "But given the variable of the war this time around, the

BOJ needs to keep its options open until the very end."

The 20-year JGB yield climbed 4.5 bps to

3.330%, while the 30-year yield added 2 bps to

3.620%.