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Asia: Most markets dip but Tokyo lifted by weak yen

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[HONG KONG] Japanese stocks rose on 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, 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 per cent 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 per cent lower and Malaysia's ringgit down 0.3 per cent.

The weaker yen lifted the Nikkei, which ended the morning 0.5 per cent higher. Shanghai added 0.4 per cent. But Hong Kong lost 0.1 per cent, Sydney fell 0.3 per cent, Seoul shed 0.2 per cent and Singapore was 0.6 per cent 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".