TOKYO: Benchmark Japanese government bonds fell on Tuesday after a bond purchase plan by the Bank of Japan indicated reduced support for shorter-dated securities.
The 10-year JGB yield rose 3 basis points to 1.48%.
Futures on the debt fell to the lowest since April.
Yields move inversely to prices.
Beginning next April, the BOJ will reduce monthly bond buying by 200 billion yen ($1.38 billion) each quarter so that the size of purchases will fall to around 2 trillion yen by March 2027.
“A reduction of bond buying amounts for maturities up to 10 years suggests that the BOJ wants the market to decide the yields,” said Miki Den, a senior Japan rate strategist at SMBC Nikko Securities.
“While for the super-long bonds, the BOJ kept the purchase amount the same to respond to the balance of supply and demand.”
The BOJ began tapering its massive bond buying last year in a bid to wean the economy off decades of heavy stimulus and revive a market that had been left dormant by its dominant presence.
This has coincided with weakening demand for long-dated debt among life insurers and other traditional buyers.
JGB falls to track US Treasury declines; investors eye BOJ’s tapering plans
At the same time, investors have grown wary of Japan’s fiscal outlook, as some lawmakers advocate for increased stimulus spending to attract voters ahead of the upper house election in July.
A slowdown in this tapering effectively signals a dovish shift and offers support to the JGB market, which has been shaken by weak demand at recent auctions and a surge in super-long yields to record levels last month.
Meanwhile, the Ministry of Finance is also expected to reduce the sale of longer-dated bonds to improve demand for such bonds.
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