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The Japanese government bonds traded tad higher Tuesday as investors wait to watch the Bank of Japan’s monetary policy decision for the month of September, scheduled to be unveiled on September 21. Further, a victory by Prime Minister Shinzo Abe in the snap election could increase the chance for BoJ Governor Kuroda to be given the second term in 2018, fueling investors’ expectations for a weak yen and an extended period of loose monetary policy.
The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1 basis point to 0.03 percent, the yield on long-term 30-year also fell nearly 1 basis point to 0.84 percent and the yield on short-term 2-year traded flat at -0.14 percent by 03:40 GMT.
The BoJ is widely expected to stand pat this Thursday. The recent production and consumption data suggest that the economy continued to expand in Q3 2017, although the pace has slowed compared to the above-potential levels in Q2 2017. Thanks to the positive growth outlook in the short-term, there is little pressure for the BoJ to add monetary stimulus.
In the financial markets, the JGB yield curve is well anchored. The 10-year JGB yield hovered in the range of -0.1-0.1 percent over the past one year since the central bank introduced the Yield Curve Control policy in Sep16 and set the long-term rate target at “around zero percent”.
The quantities of bond purchases were managed in a flexible manner. This month, for instance, the BoJ trimmed its buying of 5-10 year JGBs during the regular bond operation plans, thanks to rising demand for safe assets from the private sector amid the escalation in North Korea tensions.
Meanwhile, Japan’s Nikkei 225 jumped 1.44 percent to 20,197.00 by 03:45GMT, while at 03:00GMT, the FxWirePro's Hourly Yen Strength Index remained neutral at -45.74 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex
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