Key 10-Yr JGB Yield Hits 27-Year High of 2.275 Pct

Tokyo, Jan. 19 (Jiji Press)–The yield on the newest issue of 10-year Japanese government bonds, the country’s key long-term interest rate, briefly rose to 2.275 pct in Tokyo interdealer bond trading Monday, reaching its highest level since mid-February 1999. The rise came amid concerns that Japan may move to issue more JGBs and its fiscal health could deteriorate further as many major political parties in the nation will likely call for a consumption tax cut as part of their campaign pledges for an anticipated election for the House of Representatives, the lower chamber of the country’s parliament. On Sunday, Shunichi Suzuki, secretary-general of the ruling Liberal Democratic Party, indicated that the party is open to including in its campaign platform a plan to temporarily reduce the consumption tax rate to zero for food products. The main opposition Constitutional Democratic Party of Japan and Komeito, the LDP’s former coalition partner and now on the opposition side, said Friday that a consumption tax reduction will be included in the basic policies of the Centrist Reform Alliance, a new party launched by the two forces ahead of the Lower House poll. “Amid a lack of bond-buying incentives, the long-term interest rate will likely rise close to 2.4 pct by the election day,” an official at an asset management firm said. The 10-year JGB yield may climb further if Bank of Japan Governor Kazuo Ueda at his upcoming press conference expresses caution over additionally raising the central bank’s policy interest rate in the near future and the yen weakens to stoke inflation expectations as a result, said an official at a bank-affiliated securities firm. Ueda is set to meet the press Friday, after the BOJ’s two-day policy-setting meeting through the day, in which the bank is expected to keep its policy rate unchanged. On Monday, Japan’s benchmark Nikkei 225 stock average briefly gave up over 800 points partly because selling pressure continued amid a sense of overheating following the market’s sharp upswing earlier this month. The index later narrowed its losses to close at 53,583.57, down 352.60 points, or 0.65 pct, from Friday and extending its declining streak to a third market day. In Tokyo currency trading, the dollar stood at 158.07-07 yen at 5 p.m., down from 158.16-17 yen at the same time Friday. END [Copyright The Jiji Press, Ltd.]