The Japanese government bonds plunged on Friday after the Bank of Japan in its monetary policy meeting lefts the key interest rate unchanged along with no additional bonds buying programme. However, the central bank pledged to increase purchases of ETF buying at an annual pace of 6 trillion yen.
The benchmark 10-year bond yield, which moves inversely to its price, rose 9 basis points to -0.182 percent, the yield on 5-year note also jumped nearly 9 basis points to -0.259 percent, the yield on super long 30-year note bounced 3 basis points to 0.292 percent and the short-term 2-year JGB yield climbed 9 basis points to -0.254 percent by 06:30 GMT.
The Bank of Japan in its monetary policy decision disappointed markets by keeping its key interest rate unchanged at prevailing minus 0.1 percent. Also, the central bank kept its base money target at 80 trillion yen as well as buying of Japanese bonds.
However, the BoJ announced to increase to increase ETF purchases at an annual pace of 6 trillion yen, up from the current 3.3 trillion yen. This decision was supported by 7-2 votes as board member Takahide Kiuchi and Takehiro Sato opposed the majority decision.
The central bank in its statement proposed to increase the size of a lending programme that provides dollar funding to Japanese financial institutions and conducts comprehensive assessment of effects of QQE with negative rate policy at next rate review. They further added that the governor Haruhiko Kuroda as chairman of board instructed staff to prepare deliberations on assessment at BOJ's next meeting.
In terms of economic data release, Japan National CPI inflation fell at the fastest pace since 2013 to -0.4 percent y/y in June, in the line of markets consensus of -0.4 percent y/y fall, as compared to -1.1 percent, shall pressurise the BoJ to ease monetary policy in its next two-day policy meeting, which is scheduled to take place on September 20-21.
Meanwhile, the benchmark Nikkei 225 index closed up +0.56 percent at 16,569.27, and the broader Topix index closed higher 1.20 percent to 1,322.74 points.
