JGB yields track US peers lower as lull in tariff news offers respite

By Kevin Buckland

TOKYO, April 16 (Reuters) - Longer-dated Japanese government bond yields on Wednesday pulled back sharply from two-decade highs reached earlier in the week, tracking declines in U.S. Treasury yields as investors adjusted positions amid a lull in tariff headlines.

Twenty- and thirty-year JGB yields slid further from Monday's peaks, following small declines on Tuesday with an element of calm returning following the massive rout in U.S. debt from last week.

Superlong yields have come under additional upward pressure from government plans for large-scale fiscal spending ahead of upper house elections in July, with measures potentially including consumption tax cuts or even cash handouts.

This week, though, policymakers have stepped back from the idea of payouts, and there have been suggestions for a longer timeline before stimulus is implemented.

However, "as long as discussions aimed at large-scale economic measures do not die, the pressure for longer-dated yields to rise will not change easily," Mizuho Securities economists wrote in a note.

The 30-year JGB yield dropped 9 basis points (bps) to 2.725%, after falling 3 bps on Tuesday. It rose to 2.84% for the first time since July 2004 on Monday.

The 20-year yield sank 7 bps to 2.255%, after hitting 2.345% on Monday, also the highest since July 2004.

The benchmark 10-year yield slid 5.5 bps to 1.31%, with corresponding futures up 0.45 yen to 140.90. Yields move inversely to bond prices.

The five-year yield fell 2.5 bps to 0.855%, and the two-year yield lost 2 bps to 0.62%.

The two-year yield has been pushed lower as worries about the economic impact from U.S. tariffs spurred traders to push back bets on more Bank of Japan interest rate hikes.

In an interview with the Sankei newspaper published on Wednesday, BOJ Governor Kazuo Ueda said policy tightening will continue "at an appropriate pace" if economic and price developments move in line with its projections, "but we will scrutinise without pre-conception the extent to which U.S. tariffs could hurt the economy."

"A policy response may become necessary," he said.

Trade talks between Japan and the United States are due to kick off in Washington later on Wednesday.

(Reporting by Kevin Buckland; Editing by Varun H K)