JGBs tad lower post better-than-expected August trade balance data; eyes on BoJ’s policy decision

The Japanese government bonds trade slightly on the downside Wednesday after the country’s trade balance data for the month of August showed exports and imports surging in August, with both beating expectations as a recovery in trade appeared to gain momentum. Further, the Bank of Japan’s (BoJ) monetary policy meeting is scheduled to be held on September 21 which will add further direction to the debt market.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose nearly 1 basis point to 0.03 percent, the yield on long-term 30-year tad higher at 0.85 percent and the yield on short-term 2-year traded 1 basis point higher at -0.13 percent by 03:50 GMT.

Exports rose 18.1 percent from a year earlier (forecast +14.3 percent), the biggest increase since November 2013. Imports climbed 15.2 percent (forecast +11.6 percent). The trade surplus was JPY113.6 billion (USD1.02 billion) (forecast +JPY104.4 billion).

Shipments of autos to the U.S. increased 28.3 percent, though part of the increase in overall shipments to the U.S. can be attributed to lower exports the previous year, according to the Ministry of Finance. Shipments of electronic parts to Asia rose 21.6 percent.

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.

Meanwhile, Japan’s Nikkei 225 traded flat at 20,203.00 by 03:55GMT, while at 03:00GMT, the FxWirePro's Hourly Yen Strength Index remained highly bearish at -104.29 (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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