JGBs standstill ahead of BoJ’s first policy decision this year

Japanese government bonds remained little changed on Monday as investors await the Bank of Japan’s (BoJ) first monetary policy decision of 2018. Also, markets are looking forward to the central bank’s quarterly economic outlook release following along with the policy decision.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, traded flat at 0.078 percent, the yield on the long-term 30-year note fell 1/2 basis point to 0.828 percent and the yield on short-term 2-year remained steady at -0.134 percent by 05:00 GMT.

The BoJ policy decision is scheduled to be released on Tuesday. We believe that the central bank will continue to stay on hold. Although market participants are increasingly nervous about the possibility of the BoJ’s adjustment of the 10-year yield target this year, we expect the BoJ will not show their criteria for future adjustment of the monetary policy at this MPM. The Japanese central bank likely will revise up its economic growth outlook, but not change its bullish inflation outlook while lessening the downside risk assessment of its inflation outlook.

Looking ahead, we expect BoJ to raise its 10-year yield target in the second half of this year, removing its JGB purchase amount commitment as well, before subsequently gradually reducing the pace of its balance sheet expansion along with the adjustment of the 10-year yield target.

Meanwhile, the Nikkei 225 index traded 0.24 percent lower at 23,750 by 05:10 GMT, while at 05:00GMT, the FxWirePro's Hourly JPY Strength Index remained slightly bullish at 83.27 (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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