Following the Bank of Japan's upward revision of its inflation outlook, short-term Japanese government bond yields rose, while pressure on long-term bonds, which suffered significant selling earlier in the week, continued to ease. The yield on Japan's 2-year government bond increased by 3 basis points to 1.245%, while the 5-year yield rose by 2 basis points to 1.68%. The yield on the 40-year bond fell by 5.5 basis points to 3.94%, after having touched a record high earlier in the week. The Bank of Japan maintained its policy rate at 0.75% on Friday, with policy board member Hajime Takata voting in favor of an interest rate hike. In its latest quarterly outlook, the central bank raised four out of its six inflation forecasts and reiterated that it would raise borrowing costs if its projections are realized. "The inflation and wage outlook is relatively strong, so the central bank's tone is slightly hawkish," said Mamoru Shimode, chief strategist at Resona Asset Management Co. "Considering the rise in 2-year bond yields, this is leading the market to start slightly pricing in the possibility of a rate hike in April." Overnight index swaps indicate a 75% probability of a rate hike by the end of April. Following the BOJ's decision, the yen weakened slightly against the U.S. dollar. Investors will closely watch the press conference by BOJ Governor Kazuo Ueda at 15:30 local time for any comments on recent bond market movements or any hints regarding the future path of interest rate hikes.