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JGBs remain slightly higher in muted trading session ahead of long weekend; Q4 GDP eyed early next week

Japanese government bonds remained slightly on the upside Friday in a muted trading session that witnessed little data of major economic significance, as China’s trade surplus narrowed in January, thus leading to higher demand for safe-haven assets worldwide.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1/2 basis point to 0.07 percent, the yield on the long-term 30-year note fell 1 basis point to 0.81 percent and the yield on short-term 2-year too remained tad lower at -0.14 percent by 04:45 GMT.

China’s trade surplus shrank to USD20.34 billion in January from USD54.7 billion in December 2017. The larger than expected decline of trade surplus was mainly due to stronger than expected import, which surged by 36.9 percent y/y in dollar terms. Export also reaccelerated slightly to 11.1 percent y/y in dollar terms from 10.9 percent in December.

The January trade data were partially distorted by festival effect as last year’s Chinese New Year holiday fell in January while this year’s Chinese New Year holiday falls on mid-February. Nevertheless, judging by the actual import volume and value, we think the strong import was not only the result of seasonal effect but also thanks to sustained upward economic cycle.  In addition, China’s Balance of Payment returned to twin surplus in 2017.

Lastly, potentially adding to further discomfort to market-watchers was Bank of Japan (BoJ) policymaker Hitoshi Suzuki’s comment that policy-makers could raise rates or slow the purchase of risky assets if the central bank deems the costs of prolonged monetary easing outweigh the benefits.

Meanwhile, the Nikkei 225 index slumped 2.60 percent to 21,326.00 by 04:45 GMT, while at 04:00GMT, the FxWirePro's Hourly JPY Strength Index remained neutral at 47.59 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest

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