Japanese bond yields drop on speculation of BOJ easing

Japanese bond prices rallied, pushing the yields lower especially at the short-end of the curve as strong Yen and weak inflation expectations triggered speculation of fresh BOJ easing.

The 10-yr benchmark government bond yield fell to -0.07%. The yield has been below zero even since BOJ moved interest rates to negative territory.

At the short-end of the curve, the 2-yr yield was down more than one basis point at -0.228%. Yesterday, the BoJ Governor Kuroda expressed that the effect of negative interest rates is very strong so they would like to steadily proceed with easing policy and the timing of the next easing would be determined by inflation expectations (heavily dependent on Yen).

He further added that monetary easing tools would entail suitable combination of increased asset purchase, reducing interest rates deeper into negative zone, and purchase of risky assets.