Economics
China Slowdown Stokes Bets Kuroda Will Cushion Impact in Japan
- Spread between two- and 20-year yields drops to four-month low
- `Factors outside Japan' make it easier for BOJ to add stimulus
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The bond market is preparing for Bank of Japan Governor Haruhiko Kuroda to increase stimulus even as he sticks to his rhetoric that China’s market meltdown won’t wreck his inflation goals.
Investors pushed the gap between two- and 20-year Japanese government bond yields to a four-month low last week, indicating growing speculation that the central bank will boost purchases of so-called super-long bonds. An auction of five-year notes, which some strategists called a litmus test of easing expectations, met the highest demand in six months. An increasing number of economists now predict the BOJ will ramp up stimulus by October, after China’s yuan devaluation triggered a global market selloff.