Market Jitters: Bank of Japan Governor Ueda’s Words Send Bond Futures into a Slide
Bond Prices Decline Slightly Amid Concerns Over Bank of Japan Governor’s Comments
Bond prices experienced a slight decline on the 20th, influenced by concerns surrounding Bank of Japan Governor Kazuo Ueda’s comments about potential interest rate increases at a press conference following the policy meeting.
Kazuhiko Sano, chief fixed income strategist at Tokai Tokyo Securities, expressed caution regarding Governor Ueda’s hawkish comments, stating, “The Bank of Japan meeting is likely to be quiet.” Sano also noted that US bond yields are experiencing a steep slope, and if domestic super-long-term bonds remain weak, it will be a factor pushing the overall market down.
Core CPI Excluding Fresh Food Increases by 2.8%
According to the August National Consumer Price Index (CPI) released by the Ministry of Internal Affairs and Communications, the core CPI excluding fresh food increased by 2.8% compared to the same month last year. The core CPI excluding food and energy also rose by 2.0% compared to the same month last year. These results are in line with market expectations, and the impact on bond prices has been limited.
| Market Data |
|---|
| Long-term government bond futures for December rose 12 sen from the previous day to 144.78 yen, then fell 5 sen to 144.61 yen. |
| Newly issued 10-year bonds have not yet been traded. |
| The yield on newly issued five-year bonds is 0.495%, 0.5 basis points (bp) higher. |
Bank of Japan Expected to Maintain Monetary Policy Status Quo
The Bank of Japan is expected to decide to maintain the status quo of monetary policy at its meeting on the 20th. In a Bloomberg survey of 53 economists, all predicted policy would remain unchanged. Governor Ueda’s hawkish comments in raising interest rates in July were a contributing factor to the turmoil in the financial markets in August, and attention is now focused on the Bank’s strategy for dialogue with markets regarding the management of monetary policy.
Sano said, “If the US Federal Reserve becomes more hawkish on the assumption that US Federal Reserve interest rate cuts will contribute to a soft landing for the US economy, further rate hikes will be contained, and could become a weak factor.”