JGB yields mixed ahead of BOJ meeting; domestic politics stir uncertainty

By Brigid Riley

TOKYO, March 17 (Reuters) - Japanese government bond yields were mixed on Monday, ahead of the Bank of Japan's monetary policy meeting this week amid global uncertainties. Meanwhile, news that Japan's prime minister had given gifts to some ruling party members generated concerns about the upcoming fiscal year's budget.

The 10-year JGB yield dipped 0.5 basis point to 1.51%, while 10-year JGB futures rose 0.12 yen to 138.26 yen.

The two-year JGB yield was down 3 bps at 0.805% after earlier touching its lowest in a little more than two week at 0.8%. The BOJ is expected to hold rates steady at 0.5% when its two-day policy meeting concludes on Wednesday, putting the focus on Governor Kazuo Ueda's post-meeting press conference for any hints about the outlook.

Fears of a global slowdown caused by U.S. President Donald Trump's tariff policies have been overshadowing Japan's wage and price data. Rengo, Japan's largest union umbrella group, announced on Friday that domestic companies have agreed to raise wages by more than 5% for a second year in a row this year.

But with a preliminary reading of 5.46%, analysts said those results were within expectations and unlikely to persuade the BOJ to hike rates early.

The five-year yield declined 2.5 bps to 1.095%.

On the superlong end, the 20-year yield rose 2 bps to 2.285%, while the 30-year yield climbed to as high as 2.63%, a level last seen in April 2006.

The 40-year JGB yield briefly jumped 7 bps to a record high of 3%, and was last up 4.5 bps.

"Market participants have been paying a fair amount of attention to the issue of (Japanese Prime Minister Shigeru) Ishiba's gift certificates," said Hiroshi Namioka, chief strategist at T&D Asset Management.

Ishiba apologised on Friday for giving gift certificates to some ruling party lawmaker. The issue adds to challenges for Ishiba's minority coalition and risks delaying passage of next fiscal year's budget.

(Reporting by Brigid Riley; Editing by Varun H K)