TOKYO: Yields on Japan’s shorter-dated bonds inched down on Wednesday as investors bet the Bank of Japan will not raise its policy rate soon, as worries around tariffs cloud economic outlook.
The two-year JGB yield fell 0.5 basis point (bp) to 0.675%.
The five-year yield fell 1 bp to 0.88%.
“Worries about the economic outlook prompted investors to buy short-dated bonds,” said Miki Den, a senior Japan rate strategist at SMBC Nikko Securities.
“The market is still uncertain about the impact of the US tariffs, and if the outlook of the economy is not clear, the BOJ will not raise its policy rate soon,” he said.
The BOJ is expected to keep interest rates steady at its monetary policy meeting ending on Thursday and warn of heightening risks to the fragile economy that could keep policy in a holding pattern, as US tariffs continue to hit confidence.
Japan’s trade negotiator Ryosei Akazawa is heading to the United States on Wednesday to meet his counterparts for a second round of tariff negotiations.
Akazawa said earlier in the day that he aims for steady progress in tariff negotiations with the US, as losses at the country’s automakers from the tariffs constantly increase.
JGB yields mixed on higher US yields, poor demand at 10-year bond auction
Shares in Japan’s automakers were weak on Wednesday, weighed by worries about the tariff impacts, which also became a cue for bond investors to buy shorter-dated bonds, said Den.
Toyota Motor shares were last down 1.76%.
The 10-year JGB yield fell 0.5 bp to 1.305% The 20-year JGB yield fell 1.5 bps to 2.19%.
The 30-year JGB yield was flat at 2.695%.
The 40-year JGBs have not been traded yet as of 0430 GMT.
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