The Japanese long-term bonds traded lower on Wednesday after BoJ announced that it would buy less in some bond zones under its asset purchase programme. The yield on the benchmark 10-year bonds, which moves inversely to its price, hovered at -0.0110 marks, yield on super-long 40-year bonds jumped 3 basis points to 0.404 percent and 30-year bonds yields also climbed 3 basis points to 0.332 percent by 07:10 GMT.
Japan Q1 capital spending rose 4.2 percent y/y, higher than the market consensus of 2.4 percent, from 8.5 percent in the last quarter. Moreover, capital spending- excluding software rose 4.3 percent y/y, against market anticipation of 4.0 percent, from 8.9 percent in the previous quarter. On the other hand, company profits fell 9.3 percent y/y from prior -1.7 percent. Company sales, however, fell 3.3 percent y/y from last quarter's -2.7 percent and Nikkei Japan May (final) manufacturing PMI fell to 47.7 (preliminary was 47.6) from 48.2 in April.
The Japanese bonds 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. Today, crude oil prices fell more than 1 percent to below $50 mark after UAE Oil Minister Suhail Mohammed Al Mazrouei said the market will fix itself to a fair price for consumers and producers, adding that the rules of supply and demand are working. The remarks pour cold water on the probability that OPEC will agree to an output freeze to buoy prices. The International benchmark Brent futures fell 1.04 percent to $49.37 and West Texas Intermediate (WTI) dipped 1 percent to $48.60 by 07:10 GMT.
According to Reuters, the BoJ announced yesterday evening that it decided to reduce the initial purchase amount per operation by JPY 20 billion each in the 10-25 year zone and in the 25-40 year zone to JPY220 billion and JPY140 billion, respectively.
In addition, Japanese PM Shinzo Abe came out on the wires via Bloomberg and finally announced his decision on the sales-tax hike postponement this Wednesday. PM Abe decided to delay sales tax increase by 2.5 years, as widely speculated by the markets participants.
On Tuesday, the Japan’s April overall household spending improved by -0.4 percent y/y, against markets consensus of -1.3 percent, from down -5.3 percent in March. However, it is up 0.2 percent m/m. Meanwhile, consumer sentiment has fallen with the impact of share price slides and April earthquakes. On the other hand, April jobless rate stood at 3.2 percent (consensus was for 3.2 percent) from 3.2 percent in March. Also, April job-to-applicant ratio rose to 1.34, against market expectation of 1.30, from 1.30 in March. This marked the highest ratio since November 1991.
Meanwhile, the benchmark Nikkei 225 index was closed down -1.62 percent at 16,955.73, and the broader Topix index closed lower 1.26 percent to 1,362.07 points.
