TOKYO, July 29 (Reuters) - Japanese government bonds tumbled on Friday, sending the benchmark 10-year yield to a one-month high, after the Bank of Japan’s steps to ease monetary policy disappointed investors who had hoped measures would include additional bond purchases.
The central bank increased its purchases of exchange-traded funds but kept its base money target at 80 trillion yen ($775 billion) and also maintained its pace of purchases for other assets including JGBs.
“That the BOJ did not boost JGB buying appears to be the source of disappointment for the market,” said Makoto Noji, a senior fixed income strategist at SMBC Nikko Securities.
“Raising the JGB buying amount increases the risk of market operation failures and we can see how this could have been a point of contention among the BOJ board.”
The 10-year JGB yield added 10 basis points to minus 0.180 percent, rising as high as minus 0.170 percent earlier, its highest since June 24.
September 10-year futures skidded 1.20 points to 152.60, their biggest fall since April 2013, after hitting an intraday low of 152.44.
The five-year yield added 10.5 basis points to a one-month high of minus 0.255 percent, pulling away from a record low of minus 0.280 percent plumbed earlier this week.
Data released earlier on Friday underscored the BOJ’s challenge to pull Japan into sustainable inflation. Japan’s core consumer price index fell 0.5 percent in June from a year earlier, compared with economists’ median estimate for a 0.4 percent annual gain.
Central bank policymakers “have run out of things to do, basically, so they want to save ammunition as best they can,” said Tadashi Matsukawa, head of fixed income investment at PineBridge Investments in Tokyo. (Reporting by Tokyo markets team; Editing by Subhranshu Sahu and Richard Borsuk)