Japanese bonds remain lower in subdued trade; consumer inflation in focus

The Japanese government bonds remained marginally lower Monday as trading activity remained quiet with no major economic data or reports expected throughout the day.

Also, bonds remained weaker after US Fed rate hike speculation gathered steam following hawkish comments from Fed’s Vice Chairman Stanley Fischer over the weekend.

The benchmark 10-year bond yield, which moves inversely to its price, rose 1 basis point to -0.073 percent, the super-long 30-year JGB yield jumped 1-1/2 basis points to 0.352 percent and the short-term 2-year JGB yield bounced 1/2 basis point to -0.200 percent by 06:50 GMT.

Federal Reserve Vice Chairman Stanley Fischer stroke a hawkish tone during a speech in Colorado, saying that, looking ahead, he expects GDP growth to pick up in the coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes.

Moreover, Fischer signalled that this year interest rate hike is still on the table and added that the US economy is very near to meeting the Federal Reserve’s goals.

Over the weekend, Bank of Japan Governor Kuroda said that the central bank will not rule out deepening cut to negative rates it introduced in January and there is a sufficient chance the BoJ will add to its easing programme next month.

He further said that chances are high that the BoJ will reach its inflation target in fiscal 2017, but uncertainties are rising due to the global economic situation.

He said there is "technically" room for deeper negative rates while ruling out the use of so-called helicopter money and the BoJ will consider whether to make any changes to the JPY 80 trillion per year asset purchases after a comprehensive review of its current monetary policy that will be announced in September on the day of its policy meeting.

According to Reuters, the BoJ did not offer to buy JGBs today under its massive JGB purchase program. The move was in line with market expectations. The BoJ is widely expected to buy at least 200 billion yen of 10s to 25s and 120 billion yen of 25s to 40s on Wednesday after tomorrow's 1.1 trillion yen of 20-year JGB auction.

Lastly, investors will remain keen to focus on the Tuesday’s BoJ Governor Kuroda speech, July national consumer inflation and BoJ’s own inflation number.

Meanwhile, the benchmark Nikkei 225 closed up 0.32 percent at 16,598.19 and the broader Topix index also closed 0.62 percent higher to 1,303.68 points.