JGBs dip with Treasuries, eye Iwata comments

By Eric Burroughs

TOKYO, Oct 4 (Reuters) - Japanese government bonds dipped on Thursday, mimicking a drop in Treasuries after data showing signs of improvement in the U.S. labour market stoked expectations for an upbeat payrolls report on Friday.

Activity has been lacklustre this week as investors stick to the sidelines before the U.S. payrolls data to gauge how much more the Federal Reserve could cut interest rates and the potential impact on the Bank of Japan.

December 10-year futures 2JGBv1 fell 0.11 point to 134.79, slipping back towards a six-week low of 134.32 struck last week.

"Investors haven't really set their near-term trading strategies and are waiting for the payrolls data," said Maki Shimizu, an interest-rate strategist at UBS.

"If the data is strong, the BOJ could be confident about policy normalisation, not this month but before year-end," she said. "That might come back again."

Investors will look for clues to the central bank's policy outlook as Deputy Governor Kazumasa Iwata speaks to business leaders in Yamaguchi Prefecture at 0130 GMT. Iwata will also hold a news conference at 0500 GMT.

Iwata, seen as cautious about normalising monetary policy, voted against the BOJ's decision to last raise rates to 0.5 percent in February, later saying he opposed the move due to uncertainty on the consumer price outlook. [ID:nT333850]

The BOJ is widely seen keeping rates on hold in the next month or two but possibly raising them as soon as December. A raft of data in the past week showed the economy posting steady growth even as core consumer prices are stuck near zero.