Jan. 4 (Bloomberg) -- Japan's 10-year bonds gained for a fourth day as a slump in global stocks attracted investors to the relative safety of government debt.

Benchmark yields fell to a four-week low as the Nikkei 225 Stock Average slid the most in four months after U.S. reports this week added to concern the world's biggest economy is slowing. Japanese debt also followed an advance in Treasuries before a U.S. government report today that may show employers added the least jobs in three months.

``The tumble in stocks is providing a supporting wind behind bonds,'' said Masahiro Kami, who helps oversee the equivalent of about $3.2 billion in assets at Daiwa SB Investments Ltd. in Tokyo. ``There is no other option than to buy bonds in the very near term.''

The yield on the 1.5 percent bond due December 2017 fell 3.5 basis points to 1.465 percent as of the 11:05 a.m. close in Tokyo according to Japan Bond Trading Co., the nation's largest interdealer debt broker. The price gained 0.303 yen to 100.303 yen. A basis point is 0.01 percentage point.

Japan's financial markets shut early today after being closed since Dec. 28 for the New Year holidays.

Ten-year bond futures for March delivery gained 0.51 to 137.32 on the Tokyo Stock Exchange. The Nikkei fell 4 percent on the first day of trading for the year, the biggest decline since Aug. 17. The benchmark stock index lost 11 percent in 2007.

Manufacturing, Jobs

Bonds gained after the Institute for Supply Management said on Jan. 2 that its index of U.S. manufacturing fell to 47.7 in December, lower than economists had forecast. U.S. companies added 40,000 jobs last month, down from 173,000 the previous month, ADP Employer Services said yesterday.

Japanese notes also advanced on speculation the nation's economy will slow as delinquencies related to U.S. subprime mortgages cause deepening losses at global investment firms.

State Street Corp., the world's largest money manager for institutions, yesterday said it ousted the head of its investment unit after setting aside $618 million to cover legal claims that it made inappropriate bets on subprime mortgages.

``The subprime problem is deeply rooted and we still don't know where further risks are,'' said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which manages the equivalent of $41.5 billion in assets. ``In such a situation, it is easy to buy Japanese bonds.''

Quicker Inflation

The gain in debt was tempered by speculation accelerating inflation due to higher oil prices will give the U.S. Federal Reserve less room to cut interest rates this year.

Crude oil for February delivery rose to a record $100.09 a barrel yesterday on the New York Mercantile Exchange. The price of the commodity has climbed 22 percent in the last three months.

``High oil prices should make it hard for central banks such as the Federal Reserve and the European Central Bank to cut rates,'' said Takeo Okuhara, a debt strategist in Tokyo at Daiwa Institute of Research Ltd., a unit of Japan's second-largest brokerage. ``This should be one catalyst to boost yields.''

Ten-year yields may rise as high as 1.55 percent this quarter, Okuhara said.

The extra yield offered by 10-year debt compared with similar-maturity inflation-linked bonds has been increasing. The so-called breakeven inflation rate rose to 35 basis points from 32 basis points at the start of last week. The number reflects expectations for average annual increases in consumer prices over the next decade.

The U.S. Labor Department may today say U.S. employers added 70,000 jobs last month, compared with 94,000 in November, according to the median forecast of economists surveyed by Bloomberg News. The unemployment rate is expected to rise to 4.8 percent, the highest in more than a year, from 4.7 percent.

To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net.

Last Updated: January 4, 2008 00:08 EST