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Japan 5-Year Note Yield Falls to Record on BOJ Easing Prospects

Feb. 25 (Bloomberg) -- Japan’s five-year note yields slid to an all-time low as the government neared a decision on who will run the central bank and expand monetary easing measures.

Ten-year yields slid to a two-month low while the yen fell against all its major peers. Prime Minister Shinzo Abe is likely to nominate Asian Development Bank President Haruhiko Kuroda as Bank of Japan governor and Kikuo Iwata as a deputy at the central bank, according to a government official with knowledge of the discussions.

“Bond investors are expecting the BOJ to increase government-debt purchases regardless of who becomes the next BOJ governor,” said Toru Yamamoto, the chief strategist at Daiwa Securities Co. “Kikuo Iwata is seen as aggressive toward monetary easing.”

The yield on the five-year note declined one basis point to 0.12 percent as of 3:35 p.m. in Tokyo, the lowest since the government started to offer the securities in February 2000. The 0.1 percent debt maturing in December 2017 added 0.048 yen to 99.904 yen, according to Japan Bond Trading Co., the nation’s largest inter-dealer debt broker.

The benchmark 10-year yield declined two basis points to 0.7 percent, the lowest since Dec. 12. Ten-year bond futures advanced as much as 0.24 to 144.74, the most since Dec. 11. Rates on 20-year and 30-year bond slide 1 1/2 basis points to 1.71 percent and 1.9 percent respectively.

Abe is set to reshape the leadership of the BOJ that has adopted his 2 percent inflation target and plans to begin open-ended asset purchases next year. Current Governor Masaaki Shirakawa and two deputies will step aside on March 19.

Iwata has said the central bank should buy bonds of five years maturity and longer to create inflation expectations. Kuroda said this month that the central bank has many tools to achieve a 2 percent price target.

Chief Cabinet Secretary Yoshihide Suga said today Abe will present nominees to parliament this week, though a final decision hasn’t been made.

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Yumi Ikeda in Tokyo at yikeda4@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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