Japanese bonds nearly flat ahead of CPI data; likely to gain on BoJ easing hopes in Sep

The Japanese government bonds traded nearly flat Thursday as investors await the country’s July national consumer inflation data and the BoJ’s own inflation numbers, which are scheduled to be released on Thursday at 23:30 GMT.

Also, rising hopes for the BoJ monetary policy easing in September will underpin demand for safe-haven assets.

The benchmark 10-year bond yield, which moves inversely to its price, hovered around -0.079 percent mark, the super-long 30-year JGB yield remained steady at 0.332 percent and the short-term 2-year JGB yield stood flat at -0.187 percent by 06:30 GMT.

However, markets are likely to maintain recent range in the lead up to Fed Chair Yellen’s Jackson Hole speech on Friday.

According to recent Reuters poll, 60 percent of economists see the Bank of Japan easing in September; 40 percent see them stay unchanged. Pollsters are split on possible policy action and over 50 percent said the BoJ will adopt more flexible wording on inflation targeting.

Moreover, the JGBs have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of Japan's target. The crude oil prices declined as US stockpiles increased by 6.6 million barrels in the week ended August 19 to a record high of 1.4 billion barrels, said the Energy Information Administration.

Also, Iraq prepared to increase its exports and renewed concerns that upcoming producer talks will not rein in oversupply. Also, worries about expanding Chinese fuel exports dragged oil prices. The International benchmark Brent futures fell 0.10 percent to $49.00 and West Texas Intermediate (WTI) dipped 0.04 percent to $46.75 by 06:00 GMT.

In terms of recent economic data release, Japan July producer price index (PPI) services rose 0.4 percent y/y, higher than the expectation of 0.1 percent, as compared to the 0.2 percent in June.

Meanwhile, the benchmark Nikkei 225 closed down 0.25 percent at 16,555.95 and the broader Topix index also closed 0.19 percent lower to 1,304.27 points.