JGBs steady as BOJ trims inflation forecast

TOKYO: Benchmark Japanese government bonds were steady on Thursday as the Bank of Japan maintained its monetary policy and trimmed its inflation forecasts.

The 10-year cash JGB yield was flat on the day at 0.070 percent, down from an earlier high of 0.075 percent.

The September 10-year JGB futures contract finished up 0.01 point at 150.14.

Prices slightly weakened in the superlong zone, though yields were off session highs. The 20-year JGB yield  inched half a basis point higher to 0.590 percent from the previous close, but was below the session high of 0.595 percent, while the 30-year JGB yield also crept up half a basis point to 0.865 percent.

The BOJ again pushed back the timing for it to achieve its ambitious 2 percent inflation target, reinforcing views that it will lag well behind other major central banks in scaling back its massive stimulus programme.

The BOJ raised its growth projections for the current fiscal year through March 2018 to 1.8 percent from 1.6 percent forecast three months ago, and to 1.4 percent from 1.3 percent for the following year. But it slashed its consumer inflation forecasts for this fiscal year and the following year, to 1.1 percent from 1.4 percent, and to 1.5 percent from 1.7 percent, respectively.

"None of this was surprising to market participants," said Keiko Onogi, a senior JGB strategist at Daiwa Securities.

"People are well aware that 2 percent inflation is impossible in Japan, in the current social structure, so this was not regarded as a big event in the fixed income market," she said.

The central bank also kept intact guidance that it would keep buying government bonds so its holdings increase at an annual pace of 80 trillion yen ($714 billion).

Investors waited for BOJ Governor Haruhiko Kuroda's post-meeting news conference beginning at 0630 GMT, at which he is likely to remind markets of the central bank's resolve to maintain ultra-easy policy until inflation is sustainably above target.

Market participants also awaited the outcome of the European Central Bank's policy meeting later in the session. The ECB is expected to wait until September before possibly announcing a tapering of its bond purchases, a Reuters poll released on July 14 showed.