TOKYO: Japanese government bonds held steady on Friday, with futures nearly flat and cash bonds sticking around previous closing levels as investors shrugged off data showing consumer prices marked their fastest pace of increase in nearly five years.
Japan's core consumer prices turned positive and rose 0.4 percent in June from a year earlier, matching the median estimate of economists polled by Reuters.
"CPI was stronger than most people had expected, but looking at the breakdowns, it's mostly due to higher energy prices on the back of the yen weakness," said Naomi Muguruma, senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities.
"So I think there was little surprise in terms of the factors that pushed up the CPI, and also market participants had expected the CPI would turn to positive," she said, adding that she expects the benchmark 10-year JGB yield to trade in a narrow range centered around 0.80 percent in the coming sessions.
Japanese Finance Minister Taro Aso said on Friday in a regular press conference after a cabinet meeting that the speedy CPI rise showed that Japan was gradually shifting to inflation from deflation.
Japanese Economics Minister Akira Amari said domestic prices were gradually rising towards the government and central bank's two percent inflation target.
In its regular asset-purchase operations, the Bank of Japan offered to buy outright 200 billion yen ($2.01 billion) of JGBs with residual maturity of one year to three years, 300 billion yen of JGBs with three to five years left to maturity, and another 200 billion yen with more than 10 years remaining.
The 10-year yield was flat at 0.795 percent, holding above 0.770 percent touched in the previous two sessions, which was its lowest since May 14.
The 10-year JGB futures contract ended morning trade nearly flat, up 0.01 point at 143.54. Futures hit a two-month intraday high of 143.85 on Tuesday.
The 20-year yield was also flat at 1.730 percent, as was the 30-year yield at 1.860 percent.
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