Japanese bonds trade nearly flat ahead of BoJ’s monetary policy decision

The Japanese government bonds traded nearly flat Monday as investors await the Bank of Japan two-day monetary policy meeting, where it is widely expected to keep interest rates on hold.

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 06:00 GMT.

At its two-day policy meeting which concludes November 1, the Bank of Japan (BoJ) is widely expected to keep unchanged its minus 0.1 percent short-term interest rate target. In a quarterly evaluation of its forecasts also due at next week's policy meeting, the central bank is likely to cut next fiscal year's inflation forecast slightly, reflecting weak consumption and falling import costs.

The BoJ's massive asset purchases have failed to jolt the economy out of stagnation and the central bank at its September meeting switched to a policy of targeting interest rates rather than the pace of its money-printing. The BOJ's policy targeting the pace of money printing has been replaced by a complex "yield curve control" with a short-term rate target of minus 0.1 percent and a 10-year bond yield target "around" zero percent.

"Rates to remain unchanged in the foreseeable future. Move from balance sheet expansion to yield curve control (with a target for 10-year yield at ~0.0 percent) point towards tapering of asset purchases in the near term (we expect by year-end)," said DNB markets in a report.

According to a Bloomberg survey of economists showed majority expect no change from the bank at this meeting. Around 35 percent think that Kuroda's BOJ is done with adding to stimulus. Only 2 of the 43 respondents looking for more easing at the meeting, both forecast a cut in the negative interest rate on some commercial bank reserves to -0.2 percent.

Meanwhile, the benchmark Nikkei 225 closed down 0.12 percent at 17,425.02 and the broader Topix index closed 0.04 percent higher to 1,393.02 points.