Japanese bonds trade nearly flat after BoJ maintains monetary stimulus

The Japanese government bonds traded nearly flat Tuesday after the Bank of Japan kept its interest rate unchanged at -0.10 percent, as widely expected, while maintaining 10-year JGB yield target near zero percent. Also, the central bank aimed to increase annual JGB holdings by 80 trillion yen.

The benchmark 10-year bond yield, which moves inversely to its price, hovered around -0.04 percent mark, the yield on long-term 30-year Treasury remained steady at 0.51 percent and the yield on short-term 2-year note stood flat at -0.23 percent by 06:30 GMT.

The Bank of Japan kept its benchmark interest rate on hold at the 2-day monetary policy meeting concluded Tuesday, extending the time limit for achieving its long-drawn inflation target of around 2 percent. This followed the last month’s major overhaul that saw policymakers shift the focus from quantitative easing to interest rate targeting.

The unchanged policy decision was made by a majority 7-2 vote, holding the interest rate at -0.1 percent, since January this year, pledging to maintain the 10-year JGB yield target at around zero percent, with holdings rising at an annual pace of around 80 trillion yen.

In a quarterly review of its forecasts, the BoJ cut its inflation forecasts for the next fiscal year ending in March 2018 to 1.5 percent from 1.7 percent in July. Meanwhile, Japan's economy expanded for the second straight quarter in April-June but many expect growth to remain modest for the rest of this year, with exports and output weak on sluggish global demand.

Meanwhile, the benchmark Nikkei 225 closes up 0.1 percent at 17,442.40 and the broader Topix index closed 0.01 percent higher to 1,393.19 points.