TOKYO: Japanese government bond yields fell on Tuesday ahead of the Bank of Japan’s (BOJ) policy meeting this week, with expectations that the pace of the central bank’s tapering will be gradual.

The 10-year JGB yield fell 1 basis point (bp) to 1.020%. The five-year yield fell 0.5 bp to 0.590%.

“The market consensus is now that the BOJ’s reduction of the bond buying amounts will be gradual,” said Naoya Hasegawa, chief bond strategist at Okasan Securities.

Three months after the decision to end the negative interest rates, BOJ policymakers are brainstorming ways to slow its bond-buying and may offer fresh guidance as early as the two-day policy-setting meeting ending on Friday, Reuters reported.

The BOJ will decide to start tapering its monthly bond buying at this week’s meeting, nearly two-thirds of economists said in a Reuters poll.

JGB yields rose sharply last month, with the 10-year bond yield hitting a near 13-year high of 1.1%, due to hawkish hints from the central bank, including an abrupt cut in the amounts for its regular bond buying.

Given that the market became unstable after just that surprise reduction in the offer amount of bonds with 5-10 years left to maturity, the BOJ will take a careful approach if it decides to cut the amounts, Hasegawa said.

JGB yields fall amid expectations of BOJ keeping policy unchanged

The two-year JGB yield fell 0.5 bp to 0.37%.

The 20-year JGB yield fell 2 bps to 1.820% and the 30-year JGB yield fell 2.5 bps to 2.160%.

The 40-year JGB yield fell 2 basis points to 2.315%.