Japan Bond Trade Shrinks to TwoDecade Low, Dashes BOJ Hope to Revive Market

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TOKYO, June 7 Reuters Japans government bond market saw trading volume dwindle to a nearly twodecade low in May, dashing central bank hopes that a clarification of its policy intentions in March would revitalise a market made dormant by its huge presence.

In a policy review in March to address the sideeffects of prolonged monetary easing, the BOJ clarified that it would allow 10year yields to move 50 basis points around its 0 target.

The central bank also trimmed bond buying in market operations in the hope a handsoff approach would prod investors to trade bonds more freely.

But trading volume for newly issued 10year Japanese government bonds JGB stood at 339 billion yen 3.10 billion in May, according to Refinitiv data, marking the lowest level on a monthly basis since May 2002.

Markets believe the BOJ wont be able to head either toward a tightening or an easing of monetary policy, Koichi Sugisaki, a strategist at Morgan Stanley MUFG Securities, said on why JGB markets were not moving.

Unlike in the United States and Europe, where inflation is ticking up, Japans consumer prices have slipped in recent months as a slow vaccine rollout and a resurgence in COVID19 infections cool spending and economic growth.

That has reinforced market expectations the BOJ will maintain ultraloose policy longer than other central banks to achieve its elusive 2 inflation target.

Under yield curve control, the BOJ guides shortterm rates at 0.1 and 10year yields around 0. It also buys…

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