TOKYO: Japanese government bond (JGB) yields rose on Wednesday as minutes of the Bank of Japan’s January meeting supported market participants’ view that the central bank has taken a hawkish turn.
In addition to discussing in January the likelihood of a near-term exit from negative interest rates, the summary showed that BOJ policymakers talked about possible scenarios for phasing out the bank’s massive stimulus programme.
The benchmark 10-year JGB yield was last 3 basis points (bps) higher at 0.735%, after rising as high as 0.750% immediately after the minutes were released in the Asian morning. 10-year JGB futures fell 0.25 yen to 146.19.
The two-year JGB yield rose 2.5 bps to 0.095%, its highest since Dec. 11.
The summary of opinions “was hawkish, and perhaps more hawkish than people expected in two aspects,” said Naka Matsuzawa, chief macro strategist at Nomura.
“More opinions support policy changes in the near term…but more notable to me was there were a lot of discussions …on the measures other than NIRP (negative interest rate policy),” he said.
JGB yields rise amid caution over auctions this week
Under its massive stimulus programme, Japan’s central bank guides short-term interest rates at -0.1% and the 10-year bond yield around 0%.
It also buys government bonds and risky assets as part of efforts to reflate growth and achieve its 2% inflation target.
Aside from the timing for an end to negative interest rates, attention in the Japanese bond market is focused on when the bank will dismantle yield curve control (YCC) and further reduce its JGB purchases.
The five-year yield rose 2.5 bps to 0.310%. On the superlong end, the 20-year JGB yield and 30-year JGB yield were both up 1.5 bps, sitting at 1.530% and 1.820%, respectively.
The 40-year JGB yield ticked up 1 bp to 2.050%.
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