JGBs edge lower, focus on BOJ's view of economy
TOKYO, Dec 20 (Reuters) - Japanese government bonds edged lower on Thursday, taking a breather after the previous day's rally, as investors waited to see whether the Bank of Japan tones down its outlook on the economy.
Investors were also awaiting the vote tally of the central bank's interest rate decision due later in the day.
The BOJ is widely expected to keep interest rates unchanged at 0.5 percent at a two-day policy meeting that ends on Thursday, and the focus is on whether there will be any change in the 8-1 vote count that has held since July.
"One point to watch will be whether there will be a dissenting vote," said Junji Kojima, senior deputy manager for Sompo Japan Insurance's global securities investment department. "I think that will be a barometer that will offer an indication of the atmosphere on the inside," Kojima said, alluding to discussions among BOJ policy members.
March 10-year JGB futures fell 0.19 point to 136.77 2JGBv1, giving back some of its 0.31 point gain on Wednesday.
The benchmark 10-year yield rose 2 basis points to 1.510 percent JP10YTN=JBTC.
BOJ board member Atsushi Mizuno has dissented against the board's decisions to keep interest rates unchanged in six straight policy meetings since July.
Besides the vote tally, investors will be focusing on remarks by BOJ Governor Toshihiko Fukui at a post-meeting news conference and the contents of the central bank's monthly report.
JGBs have been supported by market expectations that the BOJ will likely hold off from raising interest rates until late next year, given uncertainty about how much the U.S. subprime mortgage crisis may affect the U.S. and Japanese economies.
Expectations for the BOJ to hold off from raising interest rates for a while are likely to be reinforced if Mizuno does not cast a dissenting vote, or if the BOJ seems to tone down its view of the economy, Sompo Japan's Kojima said.
JGB ISSUANCE PLANS
JGBs had extended gains late on Wednesday, probably because of cash bond buying by institutional investors, said Akitsugu Bandou, senior strategist for Okasan Securities.
Some traders likely seized on the rally as a selling opportunity, causing the pull-back in JGBs this morning, Bandou said, adding that a rise in Tokyo share prices also hurt JGBs.
The Nikkei share average rose 0.7 percent .N225.
The Ministry of Finance said issuance of JGBs to the market will be cut to 105.1 trillion yen ($927.8 billion) in fiscal 2008/09, down from 109.6 trillion yen this year. [ID:nTKU002933] [ID:nT172048] Continued...
