TOKYO, March 8 (Reuters) - Japan's two-year government

bond (JGB) yield hit a 13-year high on Friday amid growing

speculation that the Bank of Japan (BOJ) could exit from its

negative rate policy.

The two-year JGB yield, highly sensitive to

the BOJ's short-term rate policy, rose to 0.2% earlier in the

session, its highest since April 2011, before retreating to

0.195%, up 0.5 basis point (bp) from the previous session.

"The market has already priced in the BOJ's policy tweak and

it seems that investors are not making active trade right now,"

said Takafumi Yamawaki, head of Japan rates research at J.P.

Morgan Securities.

"They are waiting for an outcome of the BOJ meeting this

month, and they will start working on their strategy based on

yield movements after the meeting."

Expectations for the BOJ to end to negative interest rates

as soon as March grew stronger after the central bank governor

and one of its board members said on Thursday the economy was

moving towards its 2% inflation target.

Market players are now eyeing how fast the BOJ would raise

the short-term interest rate after pulling it out of the

negative territory.

BOJ's deputy governor Shinichi Uchida last month said the

central bank is unlikely to raise interest rates aggressively

even after ending its negative rates.

Under its stimulus programme, the BOJ guides short-term

interest rates at -0.1% and the 10-year government bond yield

around 0%.

The five-year yield was flat at 0.38%.

The 10-year JGB yield rose to 0.74%, its

highest since Feb. 20, and was last up 0.5 bp at 0.73%.

The 20-year JGB yield rose 1.5 bps to 1.49%.

The 30-year JGB yield rose 1.5 basis points to

1.775%.

The 40-year JGB yield rose 1.5 bps to 2.02%.