TOKYO: Japan’s two-year government bond yield hit a near 13-year high on Friday, after hawkish comments from a Bank of Japan (BOJ) policymaker boosted expectations for an early end of negative rate policy.
BOJ board member Hajime Takata said on Thursday the central bank must consider overhauling its ultra-loose monetary policy, including an exit from negative interest rates and bond yield control.
The two-year JGB yield rose 0.5 basis point (bp) to 0.19%, its highest level since May 2011.
The yield jumped 2 bp in the previous session to 0.18%.
The yields for mid- and long-term bonds rose despite rather dovish comments from BOJ Governor Kazuo Ueda overnight, who said in Sao Paulo it was too early to conclude that inflation was close to sustainably meeting the central bank’s 2% target.
JGB yields rise as Japan’s inflation data fuels caution on BOJ normalisation
“Ueda did not follow Takata’s comments probably because he wanted to stress that the BOJ would maintain its policy in March, and make a tweak in April,” Shotaro Kugo, a senior economist at Daiwa Institute of Research, said.
The five-year yield rose 1 basis point to 0.375% and the 10-year JGB yield rose 0.5 basis point to 0.715%. A weak outcome of an auction of the two-year JGBs in the previous session also lifted the yields.
“The auction result reflected expectations that the BOJ would raise short-term rates faster than the market had expected,” Ataru Okumura, a senior strategist at SMBC Nikko Securities, said.
Under its massive stimulus programme, the BOJ guides short-term interest rates at minus 0.1%.
Investors expect the BOJ will end negative rates as early as March amid growing signs of rising prices and wage increase.
Yields on super-long dated bonds fell, with the 20-year JGB yield falling 0.5 basis point to 1.455% and the 30-year JGB yield slipping 1 bp to 1.745%.
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