JGBs mixed in muted trading ahead of December trade balance data, BoJ’s monetary policy decision

The Japanese government bonds remained mixed on the first trading day of the week Monday ahead of the country’s trade balance data for the month of December, scheduled to be released today by 23:50GMT and the Bank of Japan’s (BoJ) monetary policy decision, due on January 23 for further direction in the debt market. .

The yield on the benchmark 10-year JGB note, which moves inversely to its price, remained tad higher at 0.006 percent, the yield on the long-term 30-year note hovered around 0.700 percent while the yield on short-term 2-year slumped 17 basis points to -0.169 percent by 05:30GMT.

"This week’s meeting of the Bank of Japan board will not result in any change in policy, though the board will downgrade inflation forecasts and remain dovish. Looking ahead, we think that the stalled selloff in global rates could create complications; narrower differentials and slower asset purchasing may prompt the board to look for new easing options," ANZ Research commented in its latest report.

Recent economic and financial market developments have not favoured the BoJ’s 2 percent inflation goal. The growth pulse has been disappointing, with Q1 and Q3 2018 GDP falling. So the BoJ’s output gap measure has become less positive, while the Cabinet Office’s measure has returned to being in deficit. As a consequence, underlying price pressures are likely to moderate, and the recent strengthening of the JPY and decline in oil prices will have an disinflationary impact on the CPI, the report added.

Meanwhile, the Nikkei 225 index traded 0.24 percent higher at 20,716.10 by 05:35GMT, while at 05:00GMT, the FxWirePro's Hourly JPY Strength Index remained highly bearish at -54.95 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex