The Japanese government bonds traded nearly flat Tuesday, succumbing to thin trading activity as jittery investors looked ahead to Britain's vote on European Union membership and Fed Chair Yellen’s semiannual monetary policy testimony.
The yield on the benchmark 10-year bonds, which moves inversely to its price rose hovered around -1.14 percent and the short-term 2-year JGB yield remained steady at -0.244 percent by 06:25 GMT.
In the early Asian session, JGB prices edged down amid an ebb in risk aversion that favoured equities over safe-haven debt. The benchmark 10-year JGB yield rose half a basis point to 0.145 percent, putting further distance between a record low of minus 0.210 percent last week. The 20-year yield also rose half a basis point, to 0.195 percent.
The Bank of Japan’s minutes of the April meeting, released Tuesday showcased that some members are worried over the Japanese economy and believe that overseas economies continue to pose downside risks to Japan's economy and prices.
At the meeting which was held on April 27-28, the BoJ held off on expanding monetary stimulus even as global headwinds, a strong yen and soft consumption threatened to derail Japan's fragile economic recovery. A few members remained more cautious on the outlook for Japanese inflation trend.
The meeting outlined the need to consider more flexible JGB purchases and few members also said that negative rates impair JGB markets stability, financial market function. One member said the CB's decision to keep policy on hold at the April meeting should not be seen as the central bank changing its thinking on monetary policy, suggesting the member wished to avoid giving an impression the BoJ had become reluctant to ease. But overall, members were sanguine despite lowering their consumer price forecasts, saying they could keep policy on hold because it would take time to see the benefits, Reuters reported.
On Monday, Japanese May trade balance fell to -40.7 billion yen, higher than the consensus was for 70 billion yen, as compared to 823.2 billion yen in April. Adjusted trade balance for May declined to 269.8 billion yen, against markets expectation of 113.4 billion yen, from previous 426.6 billion yen.
Also, the exports fell 11.3 percent y/y, the fastest fall since January this year, markets expectation was for -10 percent fall, from -10.1 percent in April. Further, imports fell 13.8 percent y/y against market expectation of -13.8 percent y/y, from -23.3 billion yen in April.
Markets will remain keen to focus on the first leg of Fed Chair Yellen’s semiannual monetary policy testimony before Congress on Tuesday (before the Senate Banking Committee) and Thursday’s referendum on the United Kingdom’s membership of the European Union. Additionally, Japanese markets receive no more important data of great significance this week.
Meanwhile, the benchmark Nikkei 225 index closed up +1.28 percent at 16,169.11, and the broader Topix index closed higher 1.15 percent to 1,293.90 points.
