The Japanese government bonds rallied Friday as the Bank of England lowered its bank rate to 0.25 percent with additional quantitative easing.
The yield on the benchmark 10-year bonds, which moves inversely to its price, fell nearly 1 basis point to -0.081 percent and the short-term 2-year JGB yield dipped 2 basis points to -0.188 percent by 07:08 GMT.
The Bank of England’s MPC meeting has ended the decisions with a 0.25 percent (25 basis points) cut of bank rate to a record low of 0.25 percent, from 0.5 percent previously. This was the first such move since March 2009.
It has also declared to increase the quantitative easing (QE) by an additional 60 billion pounds of gilt and top-tier corporate bond purchases of 10 billion pounds, which shall be financed via reserves issuance.
Though the bank rate cut was widely expected, but the quantitative easing was not factored in and neither was the forward guidance of the likelihood of a further cut in the Bank Rate to close to zero during the course of the year.
Moreover, According to latest reports from the Nikkei, markets have been jittery since the BoJ announced it would conduct a "comprehensive assessment" of its monetary policy in September.
Further, fears arise over the possibility of the BoJ scaling back its 80 trillion yen per year bond-purchasing program with thoughts the central bank will hit a ceiling in one or two years if it keeps buying at the current pace.
Moreover, if the bank is seen to be letting up, it may invite a stronger yen, a weaker stock market and higher interest rates.
Meanwhile, the benchmark Nikkei 225 closed flat at 16254.45 and the broader Topix index closed 0.24 percent lower to 1,279.90 points.


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