Japanese yield jumps to record high, investors betting on Bank of Japan raising interest rates in June.

As Japanese domestic yields soar to record highs, investment firms are preparing for Japanese investors' funds to potentially move out of US treasuries and flow back into Japanese government bonds. The benchmark 10-year Japanese government bond yield rose to 2.73% in Friday's trading, the highest level since May 1997. Investors are increasingly convinced that rising inflation will prompt the Bank of Japan to raise its policy rate by 25 basis points to 1% in June. The 30-year Japanese government bond yield touched 4% for the first time since the bond was first issued in 1999. The 5-year and 20-year bond yields both hit historic highs earlier this week. Yields move inversely to prices. Japanese Finance Minister Gaikotsu Katsumi told reporters on Friday that government bond yields in the world's largest bond market are rising. She said, "These trends are interrelated and are creating a compound effect." Analysts expect Japanese yields to continue rising. Prime Minister Koike's government has already provided significant subsidies on gasoline prices. Koike won a landslide victory in the February elections by promising to increase government spending and alleviate inflation pressures. Economists increasingly warn that the Koike government will be forced to prepare supplementary budgets later this year, which will further pressure Japanese government bond prices downward.