Off Tokyo CPI-Inspired Cheaps

JGB futures ticked away from session lows after the lunch break, last printing -22, while cash JGBs edge away from session cheaps (trading flat to 2bp cheaper, with 7s providing the only point of meaningful weakness given the moves in futures since yesterday’s settlement).

• The bid may be tied to Japan’s plan to restrict exports of 23 types of semiconductor manufacturing equipment, as the country moves with some of its international allies in an apparent attempt to curb the technological might of China (which was outlined ahead of the Tokyo lunch break, although Japan played down the idea that it is targeting China).
• Receiver-side flows in swaps also helped the direction of travel, with swap rates now flat to lower across the curve.
• This came after firmer than expected Tokyo CPI data applied some pressure in early Tokyo trade.
• Elsewhere, the IMF once again pushed the idea of the BoJ adopting greater flexibility in the long end of JGB the curve under its YCC mechanism, while pointing to yields out to 5s as the most important zone of the yield curve re: real economic activity.
• The BoJ will release its quarterly Rinban plan after hours. Several sell-side names have suggested that the plan could reveal some tweaks to the purchase bands, with some outlining the potential for a reduction in lower limits of the purchases from the 5- to 10-Year bucket to further out the curve given the recent richening in the space and recent purchase tweaks from the Bank.