TOKYO: Japanese government bond prices rose on Friday on growing hopes the Bank of Japan would eventually follow the US Federal Reserve's latest easing steps with some stimulus action of its own.
The Fed said it will buy $40 billion of mortgage-backed debt per month until the employment outlook improves substantially as long as inflation stays tame. It also said it was extending the timeframe for maintaining its current low interest rates until at least mid-2015, from its previous plan through late 2014.
At its two-day policy meeting ending next Wednesday, the BOJ is expected to hold off on easing monetary policy but keep hopes for it alive by offering a bleaker view of Japan's economy.
On Friday, Japan's government cut its assessment of the economy for the second straight month, keeping pressure on the central bank to do more to support it.
"The strong buying is overdone. It shows people expect the BOJ to do something, but I doubt whether it's a reason to buy aggressively," said Le Ngoc Nhan, a strategist at Morgan Stanley MUFG.
"It's a sign that people in the market are doubting the effectiveness of monetary policy. Normally, additional easing expectations mean you should see expectations of a stronger economy down the road," he said.
The 10-year JGB futures contract for December ended morning trade up 0.26 point at 143.86 after rising as high as 143.91.
The yield on the benchmark 10-year cash bond slipped 3 basis points to 0.795 percent, moving away from a three-week intraday high of 0.835 percent hit on Thursday.
The 20-year bond yield fell 1.5 basis points to 1.655 percent.
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