Japan bonds rise on Kan's debt reduction plan, global slowdown
Monday, 21 June 2010
TOKYO, June 20 (Bloomberg): Japan's 10-year bonds completed a second weekly gain after Prime Minister Naoto Kan vowed to reduce the world's largest public debt and said he will consider increasing the consumption tax.
Benchmark bonds rose for a second day yesterday before reports next week economists said will show German business confidence declined and US new home sales dropped, signaling the global economic recovery is losing momentum.
Ten-year yields fell to the lowest in a week as credit-default swaps for Japanese government bonds dropped for a second week.
"The fiscal consolidation plan helped soothe the anxiety about swelling debt," said Yuichi Kodama, chief economist in Tokyo at Meiji Yasuda Life Insurance Co, Japan's third-largest life insurer.
"Kan's stance marked a clear contrast to his predecessor who pushed for a big spending policy."
The yield on the 10-year bond dropped three basis points this week to 1.20 per cent at Japan Bond Trading Co, the nation's largest interdealer debt broker. The 1.3 per cent security due June 2020 rose 0.269 yen to 100.892 yen. The yield dropped to 1.195 per cent yesterday, the lowest since June 10.
Ten-year bond futures for September delivery climbed 0.27 this week to 140.61 on the Tokyo Stock Exchange.
"Unless we work on fiscal rehabilitation, an international organisation such as the International Monetary Fund could control our fiscal management," Kan said on June 17. "We must rehabilitate our finances with our own power without relying on other countries."
The prime minister said he would consider the opposition Liberal Democratic Party's proposal to raise the consumption tax to 10 per cent. The earliest Japan could increase the tax would be the fall of 2012, DPJ Policy Chief Koichiro Genba said on June 17.
"If a tax increase was implemented before Japan can regain the economic strength to achieve autonomous recovery, it would pose serious risks to the economy," said Seiji Shiraishi, chief economist for Japan at HSBC Holdings Plc in Tokyo.
Benchmark bonds rose for a second day yesterday before reports next week economists said will show German business confidence declined and US new home sales dropped, signaling the global economic recovery is losing momentum.
Ten-year yields fell to the lowest in a week as credit-default swaps for Japanese government bonds dropped for a second week.
"The fiscal consolidation plan helped soothe the anxiety about swelling debt," said Yuichi Kodama, chief economist in Tokyo at Meiji Yasuda Life Insurance Co, Japan's third-largest life insurer.
"Kan's stance marked a clear contrast to his predecessor who pushed for a big spending policy."
The yield on the 10-year bond dropped three basis points this week to 1.20 per cent at Japan Bond Trading Co, the nation's largest interdealer debt broker. The 1.3 per cent security due June 2020 rose 0.269 yen to 100.892 yen. The yield dropped to 1.195 per cent yesterday, the lowest since June 10.
Ten-year bond futures for September delivery climbed 0.27 this week to 140.61 on the Tokyo Stock Exchange.
"Unless we work on fiscal rehabilitation, an international organisation such as the International Monetary Fund could control our fiscal management," Kan said on June 17. "We must rehabilitate our finances with our own power without relying on other countries."
The prime minister said he would consider the opposition Liberal Democratic Party's proposal to raise the consumption tax to 10 per cent. The earliest Japan could increase the tax would be the fall of 2012, DPJ Policy Chief Koichiro Genba said on June 17.
"If a tax increase was implemented before Japan can regain the economic strength to achieve autonomous recovery, it would pose serious risks to the economy," said Seiji Shiraishi, chief economist for Japan at HSBC Holdings Plc in Tokyo.