TOKYO, Feb 26 (Reuters) - Japanese government bond yields surged on Friday, with the benchmark 10-year hitting its highest since early 2016, as expectations for higher inflation and government spending hit bonds globally. The yield on the benchmark 10-year JGBs rose 3.5 basis points to 0.175%, its highest level since January 2016 when the Bank of Japan began negative interest rates, and near the top of the range the BOJ is thought to be aiming for the 10-year yield. BOJ Governor Haruhiko Kuroda has said he would not mind the yield moving up to 20 basis points away from the central bank’s official policy target of zero percent, though the BOJ has steered clear of explicitly clarifying that in its policy statements. “Three factors are driving JGB yields higher now. One is rise in U.S. yields which reflect growing hopes of economic normalisation,” said Naomi Muguruma, senior strategist at Mitsubishi UFJ Morgan Stanley Securities. “The market has been also pressured by expectations the BOJ wants to steepen the yield curve at its policy review in March. In addition, sudden spikes in market volatility are prompting players to reduce their positions.” The BOJ is widely expected to indicate at its next policy meeting on March 19 that it will tolerate larger swings in bond yields than the current yield target that stretched 20 basis points beyond zero percent. On the week, the 10-year yield has risen 7.5 basis points, the biggest since its spikes in March last year when investors rushed to sell bonds to hold cash at hand as the pandemic caused a panic in financial markets. The five-year JGB yield rose as much as 2.5 basis points to minus 0.030%, also the highest level since January 2016. Longer-dated bond yields too edged up, with the 20-year yield rising 1.5 basis points to 0.565% and the 30-year yield adding 1.5 basis points to 0.760%. The 10-year JGB futures price dropped 0.31 point to 150.56 . (Reporting by Tokyo Markets Team; Editing by Vinay Dwivedi)