TOKYO: Japanese government bond yields hit multi-month lows on Monday, as worries about a global recession from aggressive US tariffs drove safe-haven flows to the securities and spurred speculation that the Bank of Japan will need to wait longer before raising interest rates.
The 10-year JGB yield dropped 5 basis points (bps) to 1.110% as of 0450 GMT, its lowest since January 6. Benchmark 10-year JGB futures were up 0.53 yen at 142.18 yen, after rising to their highest since December 13 earlier. Bond yields fall when prices rise.
Trump said on Sunday aboard Air Force One that tariffs were a necessary “medicine”, and signalled a willingness to accept a rout in equity markets as a result.
Japanese Prime Minister Shigeru Ishiba said on Monday the government will continue to ask Trump to lower tariffs against Japan.
JGB yields rise on BOJ stimulus exit bets, weak 40-year bond auction
“Downward pressure on rates is likely to be especially strong in Japan, which is not expected to impose any retaliatory tariffs” that could stoke domestic inflation, Mizuho Securities analysts Noriatsu Tanji and Yurie Suzuki said in a note.
In terms of BOJ policy, “we now see a greater likelihood of the rate rise being pushed back to September or later” from a main scenario for July, they said.
The two-year yield, which is more sensitive to monetary policy expectations, fell 2.5 bps to 0.585%, and had earlier dropped to as low as 0.54% for the first time since November 15.
The five-year yield fell 3 bps to 0.745%, after opening Monday at 0.725%, a level last seen on December 26.
The 20-year yield declined as much as 4 bps to 1.88% for the first time since January 29.
The 30-year yield began the session at the lowest since October 31 at 2.195%.
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