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

bond yields touched a record high on Friday at the end of a

volatile week of trade, as investors gauged government and

central bank responses to economic headwinds brought on by the

Middle East crisis.

The yield on the five-year Japanese government bond (JGB)

rose 1.5 basis points (bps) to 1.84%, the highest

on record. The benchmark 10-year yield advanced 1

bp to 2.4%, nearing the 27-year high of 2.43% touched earlier in

the week. Yields move inversely to bond prices.

Government bond yields have been rising around the world as

the war in Iran, now nearly six-week long, drives oil prices and

inflation bets sharply higher.

In Japan, expectations are rising that the government will

expand stimulus to support the economy, further straining the

country's already indebted balance sheet.

Japan's wholesale inflation jumped 2.6% in March, data

showed on Friday, adding to pressure on the Bank of Japan to

accelerate interest rate increases to control prices.

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.

"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."

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

United States and Iran hold their first round of discussions to

solidify a fragile ceasefire announced late on Tuesday.

The yield on the 40-year JGB, Japan's longest

tenor, rose 1 bp to 3.88%.

(Editing by Subhranshu Sahu)