TOKYO: Japanese government bond yields retreated from session peaks on Thursday after Bank of Japan Governor Kazuo Ueda struck a cautious note after the central bank kept interest rates steady.
At the press conference following the BOJ’s decision, Ueda said real interest rates remained very low but acknowledged fresh risks to the outlook from US President-elect Donald Trump’s proposed trade policies.
“If the economy and prices move in line with our forecast, we will continue to raise our policy rate,” Ueda said.
“As for the timing of adjusting the degree of monetary support, we need to scrutinise various data carefully in reaching a decision.”
The five-year yield reversed from the day’s peak of 0.76% to fall 0.5 basis point (bp) to 0.71% as he spoke.
“Ueda sounded surprisingly dovish,” said Miki Den, senior Japan rate strategist at SMBC Nikko Securities. Investors bought the five-year bonds because its yield rose too high earlier in the session, he added.
The 10-year JGB yield last sat at 1.08% after touching 1.095% earlier in the day, while 10-year JGB futures were down 0.24 points to 142.14 yen.
The yen, which put pressure on the BOJ earlier this year as it depreciated to 38-year lows, extended losses to weaken past the 156 per dollar level for the first time in a month.
The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July.
JGB yields rise on higher US yields, BOJ policy tightening expectation
It has signalled its readiness to hike again if wages and prices move as projected. JGB yields touched multi-year highs in November after Ueda’s comments about the economic outlook, which investors took as signs of a further policy shift.
Such bets receded after Reuters and other media reported that the central bank would go slow.
JGB yields were buoyed in morning trade by a surge in US Treasury yields on Wednesday after the Federal Reserve cut interest rates as expected, but flagged a slower pace of easing next year.
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