Japanese government bonds rose today to the highest levels in 11 months, amid speculation that the continuing strength of the yen will pressure the central bank to increase their debt purchases.
Despite this benchmark 10-year yields fell to their lowest in seven years after the Bank of Japan announced that the central bank will possibly increase the fund it has created to buy up government debt and other assets from the 5 trillion yen it has already set aside. The Ministry of Finance is also selling an approximated 2.2 trillion yen worth of 10-year bonds on Thursday.
The yen continued to appreciate, despite government efforts to lower its value, reaching a 15-year high. Daiwa Securities Capital Markets Co. analyst Keiko Onogi commented that, “The yen is prone to appreciate with central banks globally inclined to monetary easing. Given that, Japan has no choice but to steer toward easing. Ten-year yields still have room to fall and may sink below 0.8 percent by the year-end.”
This comes after the Bank of Japan cut its interest rate yesterday to between .1 and .0 percent, which it says it will keep until it feels “price stability is in sight.” This is expected to be a scenario not emerging for some time, which has prompted many investors to extend their portfolios on the basis of the near-zero interest rates.
Analysts expect more easing measures from the bank of Japan in the coming months, and the Federal Reserve has also intimated that there will be more help forthcoming for the struggling Japanese economy.
