Bloomberg News

Japan Bonds Gain, Push Yields Toward Record, on BOJ Easing Bets

March 22, 2013

Japanese government bonds rose, pushing benchmark yields closer to an all-time low, after Bank of Japan (8301) Governor Haruhiko Kuroda reiterated that he will do whatever he can to defeat deflation.

Bond futures touched the highest level on record after Kuroda said yesterday at his first press conference as BOJ chief that he would try to achieve a 2 percent price target as soon as possible. Thirty-year bonds led gains, with yields reaching a more than two-year low, on expectations Kuroda will follow through on comments that the BOJ should buy longer-term debt to achieve its policy goals.

“Expectations for the BOJ to buy longer-maturity debt are giving investors confidence to buy,” said Shinichi Horikawa, the general manager of the accounting and investment department at Mitsui Sumitomo Aioi Life Insurance Co. in Tokyo, which manages the equivalent of $24 billion. “It’ll take some time to see whether the 2 percent inflation target is achievable for the BOJ.”

The yield on the benchmark 10-year note fell 1 1/2 basis points to 0.565 percent at 2:16 p.m. in Tokyo, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price of the 0.6 percent security maturing in March 2023 advanced 0.142 yen to 100.330.

2003 Record

The debt advanced for a second day, sending yields toward the record low of 0.43 percent set in June 2003. Expectations that Prime Minister Shinzo Abe’s picks to run the BOJ would expand stimulus have pushed the rates down 23 basis points this quarter, the most since the three months ended in June 2010. Ten-year bond futures reached 145.74, a record for lead contracts.

Thirty-year rates declined five basis points to 1.625 percent, matching the lowest since August 2010.

Kuroda said in parliamentary hearings this month that asset purchases by the central bank haven’t been sufficient and it should consider buying large amounts of longer-term debt. The BOJ’s current-account balance rose to a record 50.7 trillion yen ($534 billion) yesterday, according to a statement today from the bank.

Kuroda will appear before parliament on March 26, ruling Liberal Democratic Party lawmaker Katsutoshi Kaneda said today.

Japan’s bond yields are the lowest globally, even with a debt burden projected to reach 245 percent of the nation’s economic output this year, the most in the world, according to estimates by the International Monetary Fund.

To contact the reporter on this story: Rocky Swift in Tokyo at rswift5@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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