TOKYO: Japanese government bond (JGB) yields declined on Tuesday as a continued cooling of inflation in the capital Tokyo took pressure off the Bank of Japan (BOJ) to rush to raise interest rates.

The 10-year JGB yield fell 2 basis points (bps) to 0.58% as of 0535 GMT, the lowest level since Dec. 21. Benchmark 10-year JGB futures rose 0.13 yen to 147.07.

The finance ministry is due to auction about 2.7 trillion yen ($18.77 billion) of 10-year notes on Wednesday. Core inflation in Tokyo slowed for the second straight month in December as cost-push price pressures continued to ease, data showed on Tuesday.

Separate data showed household spending fell for the ninth straight month in November, underscoring the fragile nature of Japan’s economy. “The BOJ cannot move this month,” said Shoki Omori, chief Japan desk strategist at Mizuho Securities.

“The demand side of the Japanese economy isn’t looking that good.” Expectations for a hawkish policy tweak at the BOJ’s next meeting on Jan. 22-23 had already been greatly reduced by the New Year’s Day earthquake in central Japan.

JGB yields fall as bets of BOJ policy shift fade after quake damage

At least 168 lives had been lost in the disaster, with more than 300 people still missing. “We haven’t even seen the final death toll,” Omori added.

“It wouldn’t be good for the BOJ to hike in this situation.”

The 20-year JGB yield fell 2 bps to 1.335%, while the 30-year yield declined 1 bp to 1.6%.

The five-year yield lost 0.5 bp to 0.19%.

Two-year notes had yet to trade.