Most Asia Markets Dip but Tokyo Lifted by Weak Yen

Japanese stocks rose Friday on a weaker yen as another feeble inflation reading put fresh pressure on Tokyo, but most other markets headed into the weekend on a dour note following a Wall Street sell-off.

The dollar extended gains in Tokyo after breaking above 105 yen late Thursday on increasing expectations the Federal Reserve will lift interest rates by the end of the year, providing a fillip to Japan's exporters.

The rate hike talk comes as analysts suggest the years of cheap borrowing are coming to an end, a point reinforced by a surprise jump in British economic growth that shattered any chance of another Bank of England rate cut.

That has in turn put upward pressure on bond yields from the US to Australia as traders shift out of the ultra safe investments to seek better returns. Bond yields go up as prices go down.

"We are seeing a shift, with global central banks unlikely to provide additional stimulus and that’s driving bond yields higher and is strengthening the US dollar," Niv Dagan, Melbourne-based executive director at Peak Asset Management LLC, told Bloomberg News.

The dollar's gains were cemented Friday by news that Japanese consumer prices fell for a seventh straight month, which Michinori Naruse, an analyst at Japan Research Institute told AFP meant "the Bank of Japan has no choice but to delay the deadline of the (two percent inflation) target".

While the greenback dipped slightly against the pound and euro, it kicked on against most other higher-yielding Asia-Pacific currencies with the South Korean won and Australian dollar each 0.2 percent lower and Malaysia's ringgit down 0.3 percent.

The weaker yen lifted the Nikkei, which ended the morning 0.5 percent higher. Shanghai added 0.4 percent. But Hong Kong lost 0.1 percent, Sydney fell 0.3 percent, Seoul shed 0.2 percent and Singapore was 0.6 percent lower. Wellington, Taipei and Manila also retreated.

Oil markets were subdued in Asia after enjoying a much-needed bounce Thursday but worries about Iraq and Russia's comments about being exempt from a planned output cut kept dealers on edge.

"Oil managed a tepid bounce in New York trading as Saudi rhetoric about cutting OPEC production by four percent put a temporary floor under WTI and Brent," Jeffrey Halley, senior market analyst at OANDA, said in a note.

But he added that "the onus will fall on Saudi Arabia to pull any deal together".

- Key figures around 0230 GMT -Tokyo - Nikkei 225: UP 0.5 percent at 17,462.52 (break)

Hong Kong - Hang Seng: DOWN 0.1 percent at 23,121.28

Shanghai - Composite: UP 0.4 percent at 3,124.85

Pound/dollar: UP to $1.2179 from $1.2166 Thursday

Euro/pound: DOWN to 89.52 pence from 89.57 pence

Euro/dollar: UP to $1.0903 from $1.0898

Dollar/yen: UP to 105.24 yen from 105.20 yen

Oil - West Texas Intermediate: DOWN four cents at $49.68 per barrel

Oil - Brent North Sea: DOWN seven cents at $50.40

New York - Dow: DOWN 0.2 percent to 18,169.68.10 (close)

London - FTSE 100: UP 0.4 percent at 6,986.57 (close)