SINGAPORE: Japanese government bonds (JGB) extended their week-long losing streak on Wednesday, driving yields up, after both the government and the central bank spoke about the need for higher wages.

Japan’s government will make raising wages a top priority in its economic policy next year, Deputy Chief Cabinet Secretary Seiji Kihara said on Wednesday.

That came after the Bank of Japan (BOJ) released the minutes of its December 19-20 monetary policy meeting at which it shocked markets with a surprise tweak to its bond yield control.

Those minutes showed BOJ board members discussed growing prospects of higher wages finally squashing the risk of a return to deflation.

Japanese government bond futures for the March contract month fell to 145.60 yen, down 12 yen from the previous business day and more than 200 yen lower since Dec. 20.

The BOJ announced bond buying operations but the response was lacklustre and yields remained elevated.

Two-year bond yields fell 0.5 basis point to 0.035%, while five-year bonds remained unchanged at 0.240%. The 20-year JGB yield rose 3.5 basis points to 1.275%.

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“There is a reasonable possibility that higher wages will be realized” and “the momentum of price increases may be gaining,” Shu Yamashita, chief economist at au Jibun Bank, said in a note.

In the money markets, overnight unsecured call money traded around -0.048% to -0.045%. “Funding is increasing, mainly from major banks,” a domestic financial institution said.