The Japanese government bonds traded nearly flat on Tuesday, despite Prime Minister Shinzo Abe's decision to delay a planned sales tax hike until October 2019, raising questions over how the central bank's massive debt purchase program is affecting the country's fiscal discipline. The yield on the benchmark 10-year bonds, which moves inversely to its price, hovered at -0.0111 marks and the yield on short-term 2-year bonds dipped ½ basis points to -0.235 percent by 06:15 GMT.
Japan’s Prime Minister pitched a plan to delay next year’s sales-tax hike to fellow ruling party members on Monday, some of whom expressed concerns that such a move would signal a failure of his policies to reflate the economy out of stagnation.
In addition, Japan’s April overall household spending improved by -0.4 percent y/y, against markets consensus of -1.3 percent, from down -5.3 percent in March. However, it is up 0.2 percent m/m. Meanwhile, consumer sentiment has fallen with the impact of share price slides and April earthquakes. On the other hand, April jobless rate stood at 3.2 percent (consensus was for 3.2 percent) from 3.2 percnet in March. Also, April job-to-applicant ratio rose to 1.34, against market expectation of 1.30, from 1.30 in March. This marked the highest ratio since November 1991.
On Friday, the Fed Chair Yellen on Friday said that if economic gains continue and if the labour market continues to improve that it is appropriate for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate. Although lacking a time factor, this continues to point to increased support for a summer rate hike from the FOMC.
Meanwhile, the benchmark Nikkei 225 index was closed up +0.98 percent at 17,234.98, and the broader Topix index closed higher 1.01 percent to 1,379.80 points.
