Japanese shares rose Friday as data showing inflation at a 19-month high reinforced bets on further central bank rate hikes.

The Nikkei 225 gained 0.30%, or 116.83 points, to close at 38,794.87.

Core consumer prices rose 3.2% in January, exceeding forecasts, while an index stripping out fresh food and fuel climbed 2.5%, the fastest since March 2024.

Bond yields jumped, with the two-year JGB yield hitting 0.83%, its highest since 2008.

Meanwhile, Japan's manufacturing PMI edged up to 48.9 in February, signaling a slower decline, though job cuts resumed, S&P Global said.

Services PMI ticked up to 53.1, the strongest since September, but confidence fell to a three-year low on inflation and labor concerns.

In corporate news, Nagase & Co. (TYO:8012) will launch Nagase Future Investments on April 1 and set up a 3.2 billion yen fund to back startups.

Ohsho Food Service (TYO:9936) reported a 7.5% drop in nine-month profit to 5.21 billion yen on the absence of asset sale gains, though sales rose for a fourth year.

Japan Investment Adviser (TYO:7172) said a fund it manages took a stake in EneCoat Technologies, a Kyoto University spin-off developing high-efficiency perovskite solar cells.