TOKYO: Japanese government bonds rose on Thursday, getting a lift from weaker stocks that prompted investors to seek safer assets.
Bond market sentiment was also underpinned by the Bank of Japan's move on Wednesday to easy policy. Although the immediate market impact of the BoJ's announcement quickly faded, some market participants hope the central bank will follow with more stimulus steps.
The BoJ on Wednesday said it will increase its asset buying and loan programme by 10 trillion yen to 80 trillion yen, with the increase aimed at government bonds and treasury discount bills.
The central bank also extended the deadline for meeting the new overall target for asset purchases by six months, through December 2013, with all of the additional purchases to be made after December 2012. It also abandoned a rule limiting bond buying to debt yielding 0.1 percent or higher.
"I don't see so much aggressiveness in this fund purchase, so some market participants think the BOJ's next move will come at its next meeting in October," said Tadashi Matsukawa, head of Japan fixed income at Pinebridge Investments in Tokyo.
"They're doing more aggressive easing than the Fed in a sense, because they're buying riskier assets," he added. "But in the magnitude and the duration of purchases, you can say the Fed is more aggressive than the BoJ."
The BOJ's asset purchase programme includes purchases of exchange-traded funds and real estate investment trusts, although the bank did not increase purchases of those assets in its latest easing move.
The 10-year JGB futures contract for December ended morning trade up 0.15 point at 143.72, while the yield on the benchmark 10-year cash bond fell 1 basis point to 0.805 percent.
The yield curve continued to steepen as investors shunned the superlong sector.
The 20-year bond yield lost half a basis point to 1.690 percent and the 30-year yield was flat at a five-month high of 1.945 percent.
BoJ data released Thursday showed overseas investors held a record 8.7 percent of outstanding Japanese government debt at the end of the second quarter, totaling 82 trillion yen ($1.05 trillion). That was up 20 percent from the same period a year earlier, as Europe's debt crisis prompted more investors to diversify into what they perceived to be safer assets.
Separate data from the Ministry of Finance on Thursday showed the impact of that crisis on Japan's economy, with exports falling 5.8 percent in August from a year earlier, bringing the trade balance to a deficit of 754.1 billion yen.
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