TOKYO: Japanese government bond (JGB) yields rose on Wednesday amid new comments from a Bank of Japan (BOJ) official suggesting the central bank could likely think about tweaking its ultra-loose policy now that the inflation target of 2% was “in sight”.
The two-year JGB yield hit 0.03%, the highest since Jan. 18, after getting off to a quiet start earlier in the week.
The 10-year JGB yield rose 1 basis point (bps) to 0.65%, off Tuesday’s one-week low of 0.64%.
BOJ board member Naoki Tamura’s comments on Wednesday exhibited a more hawkish tone than the one BOJ leader Kazuo Ueda left markets with at Jackson Hole.
The BOJ has kept short-term rates negative and capped 10-year yields at 0.5% with its yield curve control policy, although its latest policy tweak allows the 10-year yield to move as far as 1%.
Tamura added that the new de facto limit was a protective measure rather than a level he expected the yield to reach.
In the United States, a larger-than-expected drop in U.S. July job openings injected new hope that the Federal Reserve may keep interest rates unchanged at its next meeting, something the market has already priced in.
U.S. Treasury yields fell to three-week lows on Tuesday following the jobs report.
For the time being, JGB yields are “unlikely to fall” even as U.S. Treasury yields settle, according to Chotaro Morita, chief rate strategist at SMBC Nikko Securities.
The 10-year JGB yield may inch higher in the run-up to the auction of the bond next week, he said. The five-year yield sat 1 bps higher 0.235%. On the superlong end, the 20-year JGB yield rose 2 bps to 1.38%. The 30-year JGB yield was up 1 bp at 1.66%.
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