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Economic Times
22-05-2025
- Business
- Economic Times
Why are Japanese bond yields rising and what does it mean for Indian investors?
Japanese government bond (JGB) yields surged sharply on Thursday, following comments from a Bank of Japan (BoJ) board member, Asahi Noguchi, who dismissed the need for immediate central bank intervention to stabilize the bond market ADVERTISEMENT The yield on Japan's benchmark 10-year bond rose by 5.5 basis points to 1.57%, its highest level since March 28. Super-long bonds also saw strong upward movement, with the 20-year yield climbing to 2.595% and the 30-year yield touching 3.17%, indicating growing pressure on the long end of the yield curve. 'At times, central banks must take action to stabilise markets. I don't think we're seeing a situation where we need to do so,' Noguchi said in response to the surge in super-long bond yields. His remarks came amid calls from market participants urging the BoJ to ramp up purchases of super-long bonds or reconsider its ongoing tapering to Abhishek Bisen, Senior EVP & Fund Manager – Fixed Income at Kotak Mutual Fund, the recent spike in JGB yields is rooted in both domestic and global is attempting to unwind a decade-long soft monetary policy just as other global economies are easing rates. Compounding the situation is a rise in core inflation to a two-year high in April 2025 and a slowdown in Japanese exports to the US, aggravated by new trade tariffs. ADVERTISEMENT Further stress came from weak demand at the 20-year bond auction, which saw reduced investor appetite, pushing yields on the 20-, 30-, and 40-year JGBs up by 15–17 basis notes, "The 20-year bond auction conducted by the Bank of Japan received lower demand by the investors which resulted in a spike in bond yields." ADVERTISEMENT Political uncertainty has also added to the volatility. As Bisen points out, "Japan's Prime Minister commenting on the fiscal situation being worse than that of Greece at the height of the European crisis makes the situation trickier." Such remarks have intensified investor concerns, triggering a sell-off in longer-term Japanese bonds. Also read: Can India bond yields fall lower than that of US? Uday Kotak wonders ADVERTISEMENT The developments in Japan come on the heels of Moody's recent downgrade of the US credit rating to Aa1, with U.S. debt now exceeding $36 trillion. This downgrade led to a rise in U.S. Treasury yields — the 10-year yield climbed above 4.50%, while the 30-year moved past 5%.According to Bisen, the actions of Japanese investors, who are one of the largest foreign holders of U.S. Treasuries will be a key factor to monitor. ADVERTISEMENT "The rising bond yields in Japan may have a negative impact on the US bonds," he said, highlighting that any reduction in Japanese demand for U.S. Treasuries could exert upward pressure on American the global volatility, India's debt market has remained stable, supported by strong macroeconomic fundamentals."The Indian bond market rallied with yields trading around 6.20% for new benchmark 10-year government bonds," said Bisen, adding that the market is primarily reacting to domestic factors rather than external shocks. India's economic environment remains favorable, with headline inflation at 3.16% in April 2025, its lowest level since July 2019, and surplus liquidity in the banking system, providing headroom for further interest rate cuts. Given this backdrop, Bisen advises a long-duration strategy for fixed-income investors: "Given the expectation of further rate cuts and prevailing / expected liquidity conditions in the Indian economy, we recommend fixed investors to adopt a long duration strategy to benefit from fall in interest rates."While the global bond markets face heightened uncertainty—from Japanese monetary policy to U.S. creditworthiness—the Indian market is currently on more solid footing. There's no immediate threat to the domestic outlook, though Bisen points out that the upcoming India-U.S. trade deal in the next few months will be a key event to global bond yield movements continue to send ripples across asset classes, Indian investors would do well to stay informed—but not alarmed. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
22-05-2025
- Business
- Time of India
Why are Japanese bond yields rising and what does it mean for Indian investors?
Why are JGB yields rising? Live Events Impact on the US markets What does it mean for Indian investors? Outlook (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Japanese government bond (JGB) yields surged sharply on Thursday, following comments from a Bank of Japan (BoJ) board member, Asahi Noguchi, who dismissed the need for immediate central bank intervention to stabilize the bond marketThe yield on Japan's benchmark 10-year bond rose by 5.5 basis points to 1.57%, its highest level since March 28. Super-long bonds also saw strong upward movement, with the 20-year yield climbing to 2.595% and the 30-year yield touching 3.17%, indicating growing pressure on the long end of the yield curve.'At times, central banks must take action to stabilise markets. I don't think we're seeing a situation where we need to do so,' Noguchi said in response to the surge in super-long bond remarks came amid calls from market participants urging the BoJ to ramp up purchases of super-long bonds or reconsider its ongoing tapering to Abhishek Bisen, Senior EVP & Fund Manager – Fixed Income at Kotak Mutual Fund, the recent spike in JGB yields is rooted in both domestic and global is attempting to unwind a decade-long soft monetary policy just as other global economies are easing rates. Compounding the situation is a rise in core inflation to a two-year high in April 2025 and a slowdown in Japanese exports to the US, aggravated by new trade stress came from weak demand at the 20-year bond auction, which saw reduced investor appetite, pushing yields on the 20-, 30-, and 40-year JGBs up by 15–17 basis notes, "The 20-year bond auction conducted by the Bank of Japan received lower demand by the investors which resulted in a spike in bond yields."Political uncertainty has also added to the volatility. As Bisen points out, "Japan's Prime Minister commenting on the fiscal situation being worse than that of Greece at the height of the European crisis makes the situation trickier." Such remarks have intensified investor concerns, triggering a sell-off in longer-term Japanese read: Can India bond yields fall lower than that of US? Uday Kotak wonders The developments in Japan come on the heels of Moody's recent downgrade of the US credit rating to Aa1, with U.S. debt now exceeding $36 trillion. This downgrade led to a rise in U.S. Treasury yields — the 10-year yield climbed above 4.50%, while the 30-year moved past 5%.According to Bisen, the actions of Japanese investors, who are one of the largest foreign holders of U.S. Treasuries will be a key factor to monitor."The rising bond yields in Japan may have a negative impact on the US bonds," he said, highlighting that any reduction in Japanese demand for U.S. Treasuries could exert upward pressure on American the global volatility, India's debt market has remained stable, supported by strong macroeconomic fundamentals."The Indian bond market rallied with yields trading around 6.20% for new benchmark 10-year government bonds," said Bisen, adding that the market is primarily reacting to domestic factors rather than external economic environment remains favorable, with headline inflation at 3.16% in April 2025, its lowest level since July 2019, and surplus liquidity in the banking system, providing headroom for further interest rate this backdrop, Bisen advises a long-duration strategy for fixed-income investors: "Given the expectation of further rate cuts and prevailing / expected liquidity conditions in the Indian economy, we recommend fixed investors to adopt a long duration strategy to benefit from fall in interest rates."While the global bond markets face heightened uncertainty—from Japanese monetary policy to U.S. creditworthiness—the Indian market is currently on more solid footing. There's no immediate threat to the domestic outlook, though Bisen points out that the upcoming India-U.S. trade deal in the next few months will be a key event to global bond yield movements continue to send ripples across asset classes, Indian investors would do well to stay informed—but not alarmed.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
The Mainichi
22-05-2025
- Business
- The Mainichi
BOJ should take cautious stance on rate hikes: board member
TOKYO (Kyodo) -- The Bank of Japan should adopt a cautious approach on raising short-term interest rates as it needs to take time to examine the economic impact of its actions, a board member said Thursday. "I believe it is crucial that the bank take a measured, step-by-step approach," Asahi Noguchi, seen as a monetary dove, said in a speech, describing such a stance as taking "sufficient time" to assess the effects each time the BOJ raises its policy rate. The BOJ has raised the key rate three times since March last year, when it carried out its first hike in 17 years, as it moves to normalize monetary policy following a decade-long framework of unconventional easing. On the BOJ's reduced purchases of Japanese government bonds, which began in August last year, Noguchi said he sees no need "at this point to make any major changes," with the central bank expected to decide on whether to review its current plan at the next policy meeting in June. As part of measures to normalize monetary policy, the BOJ decided last July to reduce asset holdings on its bloated balance sheet, with the plan covering the period through March 2026. "The bank will need to examine the reduction plan for April 2026 onward from a longer-term perspective," Noguchi said, adding the BOJ has sufficient time to reduce the size of its balance sheet, which would be desirable to maintain market stability.
Business Times
22-05-2025
- Business
- Business Times
Bank of Japan policymaker rules out intervention to stem bond yield spike
[TOKYO] Bank of Japan board member Asahi Noguchi said on Thursday (May 22) he saw no need for the central bank to intervene in the bond market to stem recent sharp rises in super-long yields, describing the moves as 'rapid but not abnormal.' Noguchi, a former academic regarded as one of the central bank board's dovish members, also said the central bank must pause its interest rate hikes for the time being until there is more clarity on the impact of US tariffs on the economy. While the outcome of Tokyo's trade negotiations with Washington may become clearer, US tariffs will likely exert 'quite strong downward pressure' on the economy, he said. 'When the outlook is so uncertain, there's no point acting on interest rates,' he told a news conference, stressing the need to put off raising rates for the time being. 'It's important to avoid moving and scrutinise developments.' While diminishing prospects of a near-term rate hike have kept shorter-term yields stable, those on super-long Japanese government bonds (JGBs) soared to all-time highs this week amid calls from politicians for big fiscal spending. The spike in yields has led some analysts to speculate that the BOJ could ramp up bond buying in an emergency operation or issue a verbal warning against rapid market moves. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'Bond yields, at times, make volatile moves reflecting various views on the economic outlook,' Noguchi said. 'At times, central banks must take action to stabilise markets. I don't think we're seeing a situation where we need to do so,' he said, emphasising the need to allow market forces to determine bond yield moves. The BOJ last year exited a massive stimulus programme that included a policy capping bond yields around zero. It raised its short-term policy rate to 0.5 per cent in January, on the view Japan was making progress in durably meeting its 2 per cent inflation target. At its policy meeting next month, the BOJ will conduct an interim review of its bond tapering plan running through March and come up with a programme for April 2026 onward. Noguchi said he saw no need to make any major changes to the current plan. In compiling the reduction plan for April 2026 onward, the central bank might need to take into account how much it eventually wants to trim its huge balance sheet, he said. 'It's true the BOJ needs to reduce its huge bond holdings,' he said. 'But the priority should be to avoid disrupting markets,' to scale back its balance sheet. Fears of a US tariff-induced global slowdown forced the central bank to sharply cut its growth forecasts at its Apr 30-to-May 1 policy meeting. That has cast doubt on the view that sustained wage hikes will underpin consumption and the broader economy. A Reuters poll showed most economists now expect the BOJ will hold rates steady through September to assess the effects of US tariffs, although a slight majority still see at least a 25-basis-point hike by year-end. REUTERS
CNA
22-05-2025
- Business
- CNA
BOJ policymaker rules out intervention to stem bond yield spike
TOKYO :Bank of Japan board member Asahi Noguchi said on Thursday he saw no need for the central bank to intervene in the bond market to stem recent sharp rises in super-long yields, describing the moves as "rapid but not abnormal." Noguchi, a former academic regarded as one of the central bank board's dovish members, also said the central bank must pause its interest rate hikes for the time being until there is more clarity on the impact of U.S. tariffs on the economy. While the outcome of Tokyo's trade negotiations with Washington may become clearer, U.S. tariffs will likely exert "quite strong downward pressure" on the economy, he said. "When the outlook is so uncertain, there's no point acting on interest rates," he told a news conference, stressing the need to put off raising rates for the time being. "It's important to avoid moving and scrutinise developments." While diminishing prospects of a near-term rate hike have kept shorter-term yields stable, those on super-long Japanese government bonds (JGBs) soared to all-time highs this week amid calls from politicians for big fiscal spending. The spike in yields has led some analysts to speculate that the BOJ could ramp up bond buying in an emergency operation or issue a verbal warning against rapid market moves. "Bond yields, at times, make volatile moves reflecting various views on the economic outlook," Noguchi said. "At times, central banks must take action to stabilise markets. I don't think we're seeing a situation where we need to do so," he said, emphasising the need to allow market forces to determine bond yield moves. The BOJ last year exited a massive stimulus programme that included a policy capping bond yields around zero. It raised its short-term policy rate to 0.5 per cent in January, on the view Japan was making progress in durably meeting its 2 per cent inflation target. At its policy meeting next month, the BOJ will conduct an interim review of its bond tapering plan running through March and come up with a programme for April 2026 onward. Noguchi said he saw no need to make any major changes to the current plan. In compiling the reduction plan for April 2026 onward, the central bank might need to take into account how much it eventually wants to trim its huge balance sheet, he said. "It's true the BOJ needs to reduce its huge bond holdings," he said. "But the priority should be to avoid disrupting markets," to scale back its balance sheet. Fears of a U.S. tariff-induced global slowdown forced the central bank to sharply cut its growth forecasts at its April 30-May 1 policy meeting. That has cast doubt on the view that sustained wage hikes will underpin consumption and the broader economy. A Reuters poll showed most economists now expect the BOJ will hold rates steady through September to assess the effects of U.S. tariffs, although a slight majority still see at least a 25-basis-point hike by year-end.
