JGBs surge after BoJ’s unlimited bond-buying earlier this week; policy tightening unlikely before October

The Japanese government bonds surged Wednesday, tracking the unlimited debt-buying by the Bank of Japan (BoJ) earlier this week amid market speculation over a possible change in the monetary policy stance by the central bank ahead of the two-day meeting on July 30-31.

According to a report from Nikkei, however, the BoJ is unlikely to consider an adoption of policy tightening at its upcoming meeting, based on views of five key central bank watchers.

The yield on Japan’s benchmark 10-year bond, which moves inversely to its price, fell 1-1/2 basis points to 0.07 percent, the yield on the long-term 30-year also slumped nearly 1-1/2 basis points to 0.78 percent and the yield on short-term 2-year too remained close to 1-1/2 basis point lower at -0.12 percent by 05:15GMT.

Drastic policy changes are likely off the table for September, since they would risk influencing the ruling Liberal Democratic Party's presidential election pitting Prime Minister Shinzo Abe against at least one challenger as he seeks to stay at the helm, the report added.

Meanwhile, the Nikkei 225 index rose 0.42 percent to 22,597.50 at 05:20, while at 05:00GMT, the FxWirePro's Hourly JPY Strength Index remained highly bullish at 121.62 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex