JGBs remain nearly flat in lackluster trade; likely to follow crude oil prices

The Japanese government bonds traded nearly flat Tuesday, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance.

Also, investors now await the United States September consumer inflation data in an attempt to estimate the Fed's most likely step.

The benchmark 10-year bond yield, which moves inversely to its price, remained steady at -0.05 percent and the yield on short-term 2-year note hovered around -0.26 percent by 06:30 GMT.

Bank of Japan Governor Haruhiko Kuroda said that the consumer inflation is likely to be slightly negative or around zero percent for time being and Japan's economy continues to recover moderately as a trend. He said Japan's economy expected to expand moderately as a trend and Japan's financial system maintaining stability.

Added that the BOJ will maintain QQE with yield curve control for as long as needed to achieve 2 percent inflation in a stable manner and the central bank will adjust monetary policy as needed to maintain economy's momentum to achieve its price target. Further said that will continue expanding monetary base until core CPI stably exceeds 2 percent.

On the other hand, according to reports from the Nikkei over the weekend, the BoJ is expected to downgrade inflation forecasts at the next monetary policy meeting. It noted that the bank's most recent forecasts (contained in its quarterly economic and price outlook, published in July) are for 1.7 percent for fiscal 2017. It further cited that slow wage growth as a factor behind slow inflation.

Moreover, the Japanese bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of Japan's target. Crude oil prices clawed back minor gains in early Asia trade Tuesday following an overnight decline but trading is expected to be muted now that the market has priced in a potential production cut. The International benchmark Brent futures rose 0.74 percent to $51.90 and West Texas Intermediate (WTI) jumped 0.76 percent to $50.32 by 06:40 GMT.

Meanwhile, the benchmark Nikkei 225 closed up 0.4 percent at 16,963.61 and the broader Topix index closed 0.30 percent higher to 1,356.57 points.