TOKYO — Japanese government bond yields surged and the Nikkei share average fell on Wednesday, one day after the country’s central bank shocked markets with a shift in its yield curve control policy.
The benchmark 10-year government bond yield jumped 7 basis points to 0.480%, its highest level since July 2015, not far off 0.50%, the revised upper limit of the Bank of Japan’s policy band.
Kazuhiko Sano, a strategist at Tokai Tokyo Securities, said 10-year yields looked low compared to yields for 30 and 40-year Japanese government bonds.
“The 10-year yield could be pinned at 0.50% for the foreseeable future,” he said.
The yield on 5-year JGBs rose 6.5 basis points to 0.235%.
The Nikkei ended down 0.68% at 26,387.72, its lowest close since Oct. 13, after see-saw trade in which it briefly turned positive. The benchmark has lost 3% in the wake of the Bank of Japan’s decision that is aimed at easing some of the costs of prolonged monetary stimulus.
The broader Topix dropped 0.64% to 1,893.32.
The sub-index for automakers lost 2.36%, more than any of the other 32 industry sub-indexes as the yen strengthened on the central bank’s move.
The banking sector, however, gained 2.6% and was the best performer among the industry groups on expectations that rising interest rates will lift profits, while the insurance sector rose 0.08%. (Reporting by Junko Fujita; Additional reporting by Rae Wee in Singapore; Editing by Edwina Gibbs)