Atsushi Ito, chief yen-bond strategist at BNP Paribas Securities in Tokyo, said the 10-year yield could dip below 0.4%.
Another plus for Japan shares: record yen-bond prices make stocks look cheap.
TOKYO A week after Japan's central bank started a huge bond-buying campaign to drive down yields in the country's quadrillion-yen government-bond market, yields instead have risen, a sign of the huge headwinds the bank faces in its push to end 15 years of deflation.
The government said shortly after the earthquake that it expected two outcomes: A falling yen and rising bond yields.
In these circumstances a stronger yen and weaker bond market may be less bad news than a response to good news.
The move sent the yen plunging and bond yields to record lows.
The day of reckoning will soon drive either the yen or the Japanese bond market much lower.
The aggressiveness of the plans surprised investors, sending stocks whipsawing, the yen tumbling and government-bond yields to record lows.
The U.S. dollar and Japanese yen gained on other currencies while bond buyers snapped up Treasuries, pushing the yield on the benchmark 10-year note down to 3.21%.
The company, which makes screens for Apple's iPad and iPhone, needs to shore up cash to roll over as much as 360bn yen of short-term commercial paper and will need another 200bn yen to cover a maturing convertible bond in September 2013.
The trouble is that it is hard to disentangle the bits of a dual-currency bond the interest payments in yen and the principal in dollars.
On Thursday, it added an extra 2 trillion yen in liquidity, seeking to counter the jump in bond yields.
The most serious potential problem likely to be associated with rising bond yields is a further rise in the yen, which would crush exports and fuel deflation via lower import prices.
Until now, the surge in Japanese shares had been driven mainly by a weaker yen triggered by optimism that the central bank's massive bond-buying program and Mr. Abe's mix of stimulus and growth strategies would steer the economy out of deflation.
The Japanese Yen also fell after the Bank of Japan announced it would expand its bond-buying program.
Or a sharp fall in the yen (see article) might conceivably lead to capital flight and rising bond yields.
Even near-zero short-term rates and 10-year government bond yields of about 1% do not deter those who lust for the yen.
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The dissonance about whether the G-7 approves of Japanese Prime Minister Shinzo Abe's explicit comments about the economic benefits of a weaker yen and his public pressuring of the Bank of Japan to step up its bond-buying program likely presages more vocal concern from members of the broader G-20 when they meet later this week in Moscow.
But the Japanese government-bond market, where the easing plan calls for added purchases of 7.5 trillion yen per month roughly 3.7 trillion yen more than before is the one most directly affected by the campaign.
It is the largest-ever U.S. dollar bond issued by a Chinese company, and the biggest corporate debt offering in dollars, euros or yen in Asia ex-Japan in 10 years, Dealogic said.
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It is the largest-ever U.S. dollar bond issued by a Chinese company, and the biggest corporate debt offering in dollars, euros or yen in Asia excluding Japan in 10 years, Dealogic said.
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But the Japanese government-bond market, where the BOJ's easing plan calls for added purchases of 7.5 trillion yen per month roughly 3.7 trillion yen more than before is the one most directly affected by the campaign.
Because the yen's strength may aggravate existing disinflationary forces, the prudent course of action would be to increase Japanese government bond purchases in combination with an expansion of policies to accelerate international buying of the instruments.
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