Japan’s 5-Year Yield Declines to Lowest Since 2000 on BOJ Easing

Japan’s five-year note yield fell to the lowest level since the government started selling the debt in February 2000, after the central bank said it will shift to open-ended asset purchases to help end deflation.

Demand for 20-year bonds was limited after the Bank of Japan set a 2 percent inflation target today. The BOJ will buy about 13 trillion yen ($146 billion) in assets per month from January 2014, including about 2 trillion in Japanese government bonds and about 10 trillion yen in treasury bills, it said.

“This isn’t the end to the BOJ’s easing,” said Tadashi Matsukawa, who helps oversee the equivalent of $1.5 billion as head of fixed-income investment at PineBridge Investments Japan Co. in Tokyo. “Bond losses present a buying opportunity.”

The yield on the five-year note dropped to as low as 0.14 percent before trading at 0.15 percent at 5 p.m. in Tokyo, unchanged from yesterday, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price of the 0.2 percent security maturing in December 2017 was 100.243.

Japan’s 20-year yield rose one basis point to 1.745 percent. The benchmark 10-year rate was little changed at 0.73 percent, after touching 0.725 percent, the lowest since Dec. 14. A basis point to 0.01 percentage point.

The BOJ said today in a statement that it aims to achieve a new inflation target at “the earliest possible time.” It previously said it would ease until 1 percent inflation is “in sight.” The central bank sees a gain in consumer prices of 0.9 percent for the fiscal year starting April 2014, it said.

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