TOKYO: Japanese government bond (JGB) yields rose on Thursday, after a local media report fuelled expectations the Bank of Japan (BOJ) could exit from negative interest rate policy as soon as this month.
The benchmark 10-year JGB yield rose 2 basis points (bps) to a two-week high of 0.730%.
The two-year JGB yield rose as high as 0.195%, a level not seen since April 2011. It was last up 1 bp at 0.190%.
At least one of the BOJ’s board members is likely to say that ending negative interest rates would be reasonable at this month’s monetary policy meeting, Jiji Press reported on Wednesday, without citing sources.
Momentum has been building for Japan’s central bank to end negative interest rates as soon as this month, with spring wage negotiations likely to yield bumper pay hikes for the second year in a row.
Still, whether there’s an official proposal and vote on ending negative interest rates in March remains the “last hurdle”, Takeshi Ishida, a strategist at Resona Holdings, said.
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“If a proposal is made, then I think we’re at the point where no one will oppose it.”
Large firms will conclude their wage negotiations just days before the BOJ’s monetary policy meeting on March 18-19, meaning it might be “a bit tight schedule-wise”, said Ishida.
Meanwhile, official data on Thursday showed workers’ real wages in Japan shrank at the slowest pace in over a year on weakening price pressures.
BOJ board member Junko Nakagawa also spoke, repeating an upbeat outlook for Japan’s economy and signalling confidence in achieving the bank’s price goals.
The five-year yield was up 1 bp at 0.380%, after rising to a three-month high of 0.385%.
An auction for 30-year JGBs on Thursday saw somewhat lower sales as the BOJ’s monetary policy meeting approaches.
The bid-to-cover ratio - a measure of demand at auctions - was 2.93, down from 3.18 last month. A smaller number signals weaker demand.
The 30-year JGB yield was up 1 bp at 1.760%.
The 20-year JGB yield rose 2 bps to 1.475%.
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