JGB yield surges ahead of BOJ policy decision

The yield on Japan's 10-year government bonds increased on Tuesday, with market attention focussed on the upcoming decision from the Bank of Japan (BOJ) and the possibility of signaling a departure from its ultra-easy monetary policy. 

The 10-year Japanese Government Bond (JGB) yield reached 0.685 per cent and was last observed at 0.680 per cent, marking a 1.5 basis points increase from the previous session.

The BOJ is set to conclude its two-day policy meeting later in the day, during which members are expected to discuss whether economic conditions warrant a shift away from the current ultra-loose monetary settings. 

While market participants anticipate the BOJ to maintain its negative interest rate policy at this meeting, there is a prevailing belief that changes are on the horizon.

"Investors are prepared for some departures from previous meetings," noted Takeshi Ishida, a strategist at Resona Holdings. These potential changes may include adjustments to the BOJ's forward guidance, where it currently commits to defending its easy monetary policy without hesitation.

The BOJ has previously engaged in substantial bond purchases to curb rising yields and uphold its ultra-low rate policy. However, given that inflation has surpassed its 2 per cent target for an extended period, the BOJ has been laying the groundwork for phasing out its massive stimulus measures, potentially by loosening its control over bond yields.

The two-year JGB yield remained unchanged at 0.075 per cent, while bonds with other maturities have not yet been traded. 

Investors and analysts are closely monitoring the BOJ's decision for signals on the central bank's stance regarding its monetary policy in the face of evolving economic conditions.

(With Reuters Inputs)