JGB Yields Slip for Third Session as Markets Await BOJ Rate Call

Japanese government bonds advanced on Friday, pushing the benchmark 10-year yield lower for a third consecutive session, as investors held back from fresh positioning before the Bank of Japan's policy announcement later in the day.

The 10-year JGB yield fell 3.5 basis points to 2.955%, with bond prices moving inversely to yields. Shorter-dated paper also gained: the two-year yield, the tenor most sensitive to shifts in the central bank's policy rate, eased 1 basis point to 1.850%, while the five-year yield slipped 1 basis point to 2.285%.

The move extended a global decline in yields. U.S. Treasury yields dropped about 6 basis points to 4.94% overnight, and Britain's 10-year gilt yield also fell, helped by softer oil prices and the Bank of England's decision to pause gilt sales.

Markets are broadly expecting the BOJ to lift its policy rate to 1.25%, a level last seen 31 years ago. Governor Kazuo Ueda is scheduled to address the media after the decision.

"With a strong inclination to assess the meeting's outcome and the governor's press conference, trading during the day is likely to be dominated by a wait-and-see stance," Takayuki Miyajima, senior economist at Sony Financial Group, said in a note.

Ahead of the decision, data showed Japan's core consumer inflation held steady near the central bank's 2% target in August, underscoring persistent price pressures.

"Ueda and the Bank of Japan in general will have no choice really but to strike a hawkish note, not only delivering a 25-basis-point hike, but warning explicitly over inflation risks and indicating quite clearly to markets that more rate hikes are on the way," said Matthew Ryan, head of market strategy at global financial services firm Ebury.