Tokyo : Japan's 10-year bonds dropped, completing a fourth weekly loss, as the yen's slide to its lowest since January bolstered exporter stocks.

Benchmark yields climbed Friday to the highest level since November after Treasuries dropped the prior day, boosting US rates to the most since June.

Demand for bonds was also limited on speculation the Bank of Japan's key survey of business confidence and US non-farm payrolls this week will add to signs the global economy is recovering.

"Japanese and US yields are to test the higher end of their ranges," Shinji Nomura, chief debt strategist in Tokyo at Nikko Cordial Securities, part of Japan's third-largest banking group, said.

Negative factors

"Optimism over the BOJ's Tankan and US nonfarm payrolls (this) week are negative factors for bonds."

The yield on the 1.4 per cent security maturing in March 2020 increased 1.5 basis points, or 0.015 percentage point, last week to 1.375 per cent in Tokyo at Japan Bond Trading, the nation's largest inter-dealer debt broker.

The price dropped 0.132 yen to 100.219 yen. Yields climbed to as high as 1.385 per cent Friday, the most since November 12.

Ten-year Treasury yields reached 3.92 per cent on March 25, the highest since June 11. They were at 3.86 per cent Friday.

Ten-year bond futures for June delivery slid 0.30 last week to 138.33 as of the close at the Tokyo Stock Exchange. The contracts touched 138.16 Friday, the lowest since November. The contracts' moving average convergence/divergence, or MACD, was minus 0.2719 Friday, below the so-called signal line of minus 0.1569, suggesting that they are in a downward trend.

Damping demand

The Nikkei 225 Stock Average advanced 1.6 per cent Friday, damping demand for the refuge of government debt.

Shares gained after Japan's currency touched 92.96 yen on March 25, the weakest level since January 8.

Japanese bonds were little changed on the month and quarter, according to indexes compiled by Bank of America Corp.'s Merrill Lynch unit. The Nikkei 225 gained 8.6 per cent so far this month, advancing 4.3 per cent this quarter.

Bonds losses were tempered on expectations lingering deflation will increase the value of coupon payments.

Japan's consumer prices excluding fresh food slid 1.2 per cent in February from a year earlier, after dropping 1.3 per cent in each of the past two months, the statistics bureau said Friday.

"An end to deflation isn't in sight anytime soon, though the pace of price declines will moderate gradually," Azusa Kato, economist at BNP Paribas in Tokyo, said before the data.

The difference between yields on five-year notes and similar maturity inflation-linked debt, which reflects the outlook for consumer prices over the term of the securities, was negative 1.05 percentage points Friday, compared with minus 0.85 percentage points at the end of last year.