JGBs slide as investors remain cautious ahead of BoJ’s monetary policy meeting

The Japanese government bonds slid Wednesday as investors remained cautious ahead of the Bank of Japan’s (BoJ) two-day monetary policy decision, scheduled to be unveiled on July 20.

The benchmark 10-year bond yield, which moves inversely to its price, rose 1/2 basis point to 0.08 percent, the long-term 30-year bond yields hovered around 0.86 percent and the yield on the short-term 2-year note traded flat at -0.10 percent by 06:10 GMT.

Board members will likely continue to stress that inflation is on the uptrend, on the back of above-potential GDP growth and a positive output gap. But they would also admit that the reflation process takes longer than expected as companies remain cautious on wage and price setting. The governor is unlikely to hint a change in policy stance or to disclose any details about the future exit plan at this meeting.

"Given that the short-term inflation outlook is far weaker than official expectations, there should be little reason for the BoJ to raise the interest rate targets or to allow the actual yields to rise significantly in the coming months," DBS Bank commented in its latest research report.

Meanwhile, Japan’s Nikkei 225 closed flat at 20,020.86, while at 06:00GMT and the FxWirePro's Hourly Yen Strength Index remained neutral at -43.78 (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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