Japan Bond Futures Drop After BOJ Plans Slower Bond Buying Cuts

Japanese bond futures dropped after the central bank held rates steady and said it would slow its tapering of government bond buying from the start of the next fiscal year.

The yen rose slightly against the dollar to 144.72 as 12:36 p.m. Tokyo time, while JGB futures dropped 0.1%. The BOJ eased the tempo at which it will decrease its monthly bond purchases from next fiscal year to a quarterly reduction of ¥200 billion ($1.4 billion), from the current pace of ¥400 billion.

The market has been focused on the pace of the bond buying taper, as the central bank was widely expected to maintain rates due to uncertainties from US policy and tariffs. In a Bloomberg of 53 economists, 65% predicted the bank will move to slow its pace of bond purchase cuts starting in April next year.

Yields at the long-end of the curve have been on the rise globally amid concerns over fiscal policy. In Japan, 30-year and 40-year yields hit their highest levels since inception last month and there has been speculation that the Ministry of Finance may adjust issuance to calm investor nerves.

The market will be closely watching Governor Kazuo Ueda’s press conference this afternoon for any hints on the timing of the next rate hike.