MNI POLICY: 10-Year JGB Yld At -0.155%; Lowest Since Aug 2016

     TOKYO (MNI) - The yield on the 10-year Japanese government bonds fell to

-0.155% on Wednesday, down two and half basis point from Tuesday's close,

hitting the lowest level since August 2016, when it fell to a record low -0.19%.

     The Bank of Japan is unlikely to reduce the scale of its purchases of

long-term JGBs in the near future, as it will look to prevent the 10-year bond

yield from falling out of the -0.20% to +0.20% range the BOJ unofficially

tolerates.

     BOJ officials in charge of daily operations focus on the four features;

speed, level, volatility and background behind rate moves.

     If the drop in bond yields was rapid and it wasn't consistent with overseas

moves, the BOJ would try to restrict the drop in JGB yields, but the recent drop

is in line with overseas moves, possibly preventing the BOJ from taking action

anytime soon.  

     The recent drop was triggered by the declines in U.S. Treasury bond yields

amid hopes for rate cuts by the U.S. Federal Reserve in the second half of this

year. Downward pressure was strengthened Tuesday by remarks by the European

Central Bank head Mario Draghi, who said the ECB recently discussed restarting

its sovereign bond purchase programme and would consider increasing limits on

its purchases of individual countries' debt.

     He also said, "Further cuts in policy interest rates and mitigating

measures to contain any side effects remain part of our tools."

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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