TOKYO: Japanese government bonds edged down on Tuesday, as investors awaited the outcome of the Bank of Japan's two-day policy meeting.
The central bank is expected to announce its regular policy decision after midday Tokyo time (0300 GMT), and is likely to extend a loan programme for growth industries and stress its willingness to take more monetary steps to stimulate the economy as needed.
The JGB market is unlikely to react much, however, unless the BOJ surprises by boosting government bond purchases or extending the maturity of bonds it takes under the asset-buying scheme.
At its meeting last month, the central bank unexpectedly eased policy by saying it would spend an extra 10 trillion yen ($121.6 billion) on JGB purchases.
Since the BOJ buys bonds with up to two years left to maturity, its additional purchases have capped the short- and medium-end of the yield curve.
"Although additional easing is fundamentally unlikely at this time and under current conditions, we believe market expectations for further action are likely to linger," Chotaro Morita, head of Japan fixed-income strategy at Barclays Capital Japan, wrote in a note to clients.
Ten-year JGB futures slipped 0.05 point to 142.40, while the yield on the latest 10-year JGB rose one basis point to 0.980 percent.
The yield on the 20-year note fell half a basis point to 1.755 percent, but that tenor was expected to face selling pressure later in the week ahead of Thursday's auction of 1.1 trillion yen of 20-year notes.
Market participants did not react to comments from Japanese Finance Minister Jun Azumi that the country will go ahead and buy 65 billion yuan ($10.3 billion) in Chinese government debt as part of a push for closer economic ties between Asia's top economies.
"That could be a market theme going forward but has no immediate impact," said Credit Suisse strategist Shinji Ebihara.
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