Japanese government bond prices drop

Japanese government bond prices fell on Friday, tracking US debt prices, which eased after a key US manufacturing survey showed a surprisingly strong reading.
US Treasuries slipped on Thursday following the Philadelphia Federal Reserve's upbeat business conditions index for the US mid-Atlantic region, which exceeded forecasts.
In the absence of domestic economic data or debt auctions, traders also turned to the stock market for direction, with some dealers citing speculators selling bond futures to buy stock futures.
The benchmark September futures contract fell as low as 132.45 when the Nikkei stock average rose to its intraday highs.
JGB futures ended the day session down 0.26 point at 132.60, retreating from a two-month high of 133.08 hit on Thursday.
The yield on the benchmark 10-year cash JGBs rose 3.5 basis points to 1.855 percent. Its brief foray to a one-month low of 1.805 percent on Thursday had triggered profit-taking.
"No one wants to buy below 1.8 percent," said a trader at a European brokerage firm. "The yield will stay roughly in the 1.8-1.9 percent range."
The 10-year yield has stayed mostly in that range since the Bank of Japan raised rates to 0.25 percent from zero in mid-July.
Market reaction was muted to comments by BOJ Governor Toshihiko Fukui who said in an interview with Kyodo news agency that the central bank will keep monetary policy loose to the extent that inflationary risks do not emerge.
Kyodo reported on Friday that Fukui also said the BOJ will adjust interest rates gradually by monitoring the outlook for the economy and prices.
Next week's consumer price index, the calculation of which is due to be revised by the government, will be key in gauging the BOJ's future policy course, he said. The revision to the CPI data in August was expected to cause an adjustment of around minus 0.2 percentage point to the data.
The market also showed no response to a US media report that said North Korea may be preparing its first test of a nuclear bomb.
In the euroyen futures market the benchmark March contract price fell 1.5 basis points to 99.145. That price indicates a three-month interbank rate of 0.855 percent, compared to 0.435 percent now.