TOKYO, Aug 30 (Reuters) - Japanese government bond (JGB)

yields rebounded on Friday, buoyed by a rise in their U.S. peers

and inflation data from Japan's capital that continues to come

in above the Bank of Japan's 2% target.

The benchmark 10-year JGB yield climbed 2

basis points (bps) to 0.905% as of 0329 GMT, while the 10-year

JGB futures fell 0.15 yen to 144.58 yen.

U.S. Treasury yields rose on Thursday, after data indicated

the world's largest economy was on solid enough footing to give

the Federal Reserve room to be less aggressive in cutting

interest rates this year.

Meanwhile, core inflation in Japan's capital accelerated for

a fourth straight month in August, data showed on Friday,

tracking comfortably above the central bank's 2% target.

The latest figures keep alive expectations of more interest

rate hikes ahead.

Views on whether further hikes will come within the year

differ, however, with short-term financial markets expecting it

unlikely while economists probably still see a strong chance,

said Yoshiro Sato, an economist at Resona Holdings.

While BOJ officials have emphasised there won't be any rate

increases while markets remain fragile, Governor Kazuo Ueda said

the central bank would raise rates further if inflation remains

on track to durably hit its 2% target in the coming years.

"With the inflation rate notably around 2% and wages rising

to a degree that's probably higher than what the BOJ expected, a

rate hike within the year wouldn't be strange," said Sato.

Elsewhere on the curve, the 20-year JGB yield

rose 1.5 bps to 1.72%, while the 30-year JGB yield

ticked up 0.5 bp to 2.08%.

The two-year JGB yield was also up 0.5 bp at

0.37%.

The five-year yield rose 1 bp to 0.505%.