JGBs trade nearly flat in subdued trade; focus shifts to snap election

The Japanese government bonds traded flat Tuesday as investors remained sidelined in any major trading activity amid lack of significant economic data through the day. Japan’s Prime Minister Shinzo Abe said he’ll dissolve the lower house of parliament on September 28 for a general election as he announced a USD18 billion economic package.

Also, according to the Bank of Japan’s (BoJ) July 19-20 monetary policy meeting minutes released overnight, policymakers said that they should stick with their current policy framework and had reason to be optimistic about consumer prices because measures of inflation expectations have stopped falling, Reuters reported.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, traded flat at 0.02 percent, the yield on long-term 30-year rose nearly 1 basis point to 0.83 percent and the yield on short-term 2-year hovered around -0.13 percent 03:35 GMT.

At a press conference Monday, Abe unveiled a slew of economic measures including more education spending. He said he’d pay for them with funds from a consumption tax increase originally intended to rein in the nation’s swollen debt. He also spoke about the need to keep up pressure on North Korea after Kim Jong Un’s regime fired two missiles over Japan in recent weeks.

Voting will be set for October 22, according to three people with knowledge of his ruling coalition’s plans. Heightened tensions with North Korea have boosted Abe’s approval rating after a series of scandals, and may help him retain his coalition’s two-thirds majority in the lower house of Parliament, Bloomberg reported.

Meanwhile, Japan’s Nikkei 225 traded 0.22 percent lower at 20,353.50 by 03:40GMT, while at 03:00GMT, the FxWirePro's Hourly Yen Strength Index remained highly bullish at 110.38 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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