TOKYO, June 12 (Reuters) - The yields on Japanese government bonds fell on Monday as investors strengthened bets for the Bank of Japan to leave stimulus settings unchanged at its meeting this week.
The 10-year JGB yield fell 1 basis point (bp) to 0.420%, retreating further from the 0.5% policy cap under the BOJ's yield curve controls (YCC).
Benchmark 10-year JGB futures rose 0.19 yen to 148.19.
The BOJ is likely to keep policy settings unchanged on Friday, while maintaining its forecast for a moderate economic recovery, sources told Reuters. While that could mean an upgrade to the central bank's inflation forecasts at the July meeting, BOJ Governor Kazuo Ueda has stressed a change in policy isn't likely until durable wage growth accompanies consumer price rises.
Several domestic media carried similar reports.
"There's a consensus being built that Governor Ueda is unlikely to move this week, and may not move until late this year or even next year," said Naomi Muguruma, senior market economist, Mitsubishi UFJ Morgan Stanley.
Many investors had expected that the BOJ would tweak or even scrap YCC in the first half of this fiscal year, ending in September, but are now thinking they can't wait for higher yields before buying, Muguruma said.
The five-year yield fell 1 bp to 0.07%, the 20-year yield dropped 1 bp to 1.005%, and the 30-year yield slipped 1.5 bps to 1.245%.
Thee two-year JGBs were yet to trade, as of 0430 GMT. (Reporting by Kevin Buckland; Editing by Sherry Jacob-Phillips)
