Japan’s 10-year bond yield falls after BOJ policy decision

TOKYO: Japan’s 10-year government bond (JGB) yield fell after the Bank of Japan (BOJ) kept its policy unchanged as widely expected.

The 10-year JGB yield fell 1.5 basis point (bps) to 0.935%, after rising to a high of 0.96% before the decision.

The BOJ maintained ultra-low interest rates and signalled the need to scrutinise global economic developments, highlighting its focus on risks to a fragile domestic recovery in deciding when to next tighten policy.

While the policy was unchanged, the market is now cautious that the BOJ may amend the wording of its reference to future policy, said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.

“BOJ officials have said the central bank is in no rush to raise rates, but Governor (Kazuo) Ueda may take out those words today in his statement, which weighs on bond prices.”

The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July.

But central bank officials have since signalled a cautious and slow approach to shifting policy. Political uncertainty may force the central bank to stay pat for the rest of 2024, some analysts say.

“Depending on how a new coalition will be formed, the BOJ wants to secure an opportunity to raise rates as early as December by removing the ‘no rush’ from the statement,” said Inadome.

JGB yields little changed as market weighs uncertain outlook

The Japanese ruling coalition’s failure to retain a majority in Sunday’s lower house elections may force the Liberal Democratic Party to court smaller opposition parties such as the Democratic Party for the People (DPP) in order to stay in power.

Yuichiro Tamaki, head of the DPP, has said the BOJ should avoid changing its ultra-loose monetary policy for now.

The five-year yield fell 1.5 bps to 0.565%.

The 20-year JGB yield fell 0.5 bp 1.795%. The 30-year JGB yield fell 1 bp to 2.210%.