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Updated March 11th, 2024 at 09:31 IST

BOJ considers exiting negative rates, JGB yields rise

The benchmark 10-year JGB yield reached a one-month high, rising by 3 bps to 0.760% in early trade, while 10-year JGB futures fell by 0.14 yen to 146.11 yen.

Reported by: Business Desk
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Flag of Japan | Image:Pixabay
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Japanese bonds in focus: Japanese government bond yields experienced an uptick on Monday amidst reports suggesting the Bank of Japan's inclination towards exiting negative interest rates next week.

The benchmark 10-year JGB yield reached a one-month high, rising by 3 basis points to 0.760 per cent in early trade, while 10-year JGB futures fell by 0.14 yen to 146.11 yen.

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Reports from sources familiar with the Bank of Japan's thinking indicate a growing momentum within its policymaking circles to terminate negative interest rates this month. 

Furthermore, there's a likelihood of the central bank overhauling its massive stimulus program, including its bond yield control (YCC) and purchases of riskier assets.

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According to Japan's Jiji news agency, discussions are underway to replace YCC with a new quantitative framework. 

Currently, the BOJ guides short-term interest rates at -0.1 per cent and maintains the 10-year government bond yield around 0 per cent under its stimulus programme.

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Investors are interpreting these reports as potential signals for an earlier-than-expected hike, with market expectations leaning towards March rather than April, as stated by Shinichiro Kadota, chief currency strategist at Barclays.

The news coincides with indications that Japanese companies are likely to offer major pay hikes during annual wage talks with unions, a factor marked by Japan's central bank as crucial in determining the timing of its exit strategy. 

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Negotiations are set to conclude on March 13, just before the BOJ's meeting on March 18-19.

Revised government GDP data showed that Japan's economy avoided a technical recession, providing further impetus for an earlier exit from negative rates, according to Kadota.

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Market expectations for an end to negative rates grew stronger following remarks by BOJ chief Kazuo Ueda and one of its board members, suggesting that the economy is progressing towards its 2 per cent inflation target.

In the bond market, the five-year yield reached its highest level in four months before settling at 0.385 per cent. Meanwhile, the two-year JGB yield remained steady at 0.195 per cent.

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The 20-year JGB yield climbed to around a one-month high of 1.535 per cent, while the 30-year JGB yield rose to 1.825 per cent, its highest since February 1, before easing to 1.815 per cent.

(With Reuters Inputs)

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Published March 11th, 2024 at 09:29 IST

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