Forex Flash: Japan bond market showing rising inflation expectations - RBS

FXstreet.com (Barcelona) - “The Japanese bond market has been quite volatile since the BoJ policy announcement,” says Greg Gibbs FX Trading Strategist at RBS. “Despite the very aggressive purchases planned by the BoJ across the curve that will essentially absorb net new issuance by the government over the next two years, and potentially until the BoJ makes its 2% inflation target, yields have rebounded significantly in recent sessions,” the analyst notes.

“This suggests that JGB investors are seeing the inflationary consequences of the BoJ policy and are reticent of buying JGBs,” Greg suggests, adding: “It may indicate that Japanese investors will look increasingly to foreign bond markets, crowded out by the BoJ. It is not surprising then that the JPY remains weak and JPY crosses are rising further,” he concludes.