JGBs shrug off BOJ, 10-year yield off 7-week high
* BOJ holds rates at 0.1 pct as widely expected
* BOJ Gov Shirakawa says no risk of Japan deflation spiral
* JGBs take BOJ rate decision, Shirakawa remarks in stride
* Ten-year yield hovers near previous day's 7-week high
TOKYO, Aug 11 (Reuters) - Japanese governments bonds drifted on Tuesday, keeping 10-year yields hovering near a seven-week high as caution prevailed ahead of a Federal Reserve policy decision this week.
JGB futures were virtually flat and cash bonds were steady to slightly firmer. A rise in U.S. Treasuries the previous day lent support to JGBs, but gains were capped by a rise in Tokyo shares .N225 to 10-month highs, market players said.
JGBs showed little reaction after the Bank of Japan kept interest rates steady at 0.1 percent, as widely expected, and also maintained its cautious view on the economy. [ID:T328059] [ID:T252975]
Bonds also took in stride comments by BOJ Governor Masaaki Shirakawa, with JGB futures stuck in a narrow range in the evening session.
Shirakawa said Japan was unlikely to slip into a deflationary spiral but warned that downward price pressure could persist as the global economy suffers the aftershock of a severe recession. [ID:nT328059]
Lead September 10-year JGB futures stood at 137.19 1JGBv1 in evening session trade, little changed from 137.20 2JGBv1 at the end of the regular trading session.
Cash bond yields were also unswayed by Shirakawa's remarks.
The 301st 10-year JGB yield dipped 1 basis point on the day to 1.445 percent JP10YTN=JBTC.
The 10-year JGB yield hit a seven-week high of 1.460 percent on Monday after U.S. jobs data last Friday gave the clearest indication yet that the U.S. economy was turning around from a deep recession.
CAUTIOUS ASSESSMENT
In a statement accompanying its rate decision, the BOJ said annual falls in consumer prices were accelerating in reaction to last year's spike in oil prices, but it reiterated that the pace of fall would narrow in the latter half of this fiscal year, which ends in March 2010. Continued...
