TOKYO: Japan’s government bond yields jumped to their highest level in more than a month on Wednesday, after the Bank of Japan (BOJ) Governor Kazuo Ueda said the chance of meeting the country’s inflation goal was rising, driving bets for a policy shift.

When asked whether an exit from the negative rate policy was nearing at a post-meeting news conference on Tuesday, Ueda said the prospects of seeing the inflation trend hit 2% were gradually heightening.

“The market was worried that the BOJ might not change its policy even in April.

But Ueda’s comments hinted there could be a shift as early as in March,“ said Keisuke Tsuruta, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

“That prompted a big sell-off of JGBs. But this was an initial reaction. I do not think the sell-off would continue.”

The 10-year JGB yield jumped 8 basis points (bps) to 0.715%, its highest since Dec. 13.

The five-year yield rose 7 bps to 0.305%, its highest since Dec. 18.

Japan’s 10-year yield rise on caution ahead of BOJ decision

At its two-day policy meeting that concluded on Tuesday, the BOJ left unchanged its short-term rate target at -0.1% and that for the 10-year bond yield at around 0%.

Ueda also mentioned a possibility of reviewing the bank’s asset-buying framework of investing in exchange-traded funds.

Expectations of a January policy shift of the BOJ’s ultra-loose policy had receded after a devastating earthquake hit western Japan on New Year’s day.

Many market players expect a policy tweak to take place in March or April at the earliest. The 20-year JGB yield jumped 9 bps to 1.510%, its highest since Dec. 12.

The 30-year JGB yield rose 7.5 bps to 1.805% and basis points to 1.805% and the 40-year JGB yield rose 7 bps to 2.050%, their highest since Nov. 7.

Benchmark 10-year JGB futures fell 0.84 yen to 146.15.


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