The Bank of Japan refrained from adding to its record bond- buying program on Jan. 21, as global central banks compete to lower interest rates, weaken currencies and push investors into riskier securities. Debt slid after demand at a 20-year auction fell to its weakest level since November, amid concern over how the central bank will exit stimulus policies designed to achieve 2 percent inflation.

“If you think consumer prices will be reaching 2 percent, yields on the longer end are way too low,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. “The current bond market is just driven by supply-demand imbalance.”

Eoin Treacy's view

The Bank of Japan is still engaged in quantitative easing but traders reliant on momentum were looking for an increase. Today’s upside key day reversal on JGB yields signals the contraction has at least paused and increases potential that a reversion towards the mean is now underway. 

Amid all the commentary about the sustainability of China’s rally and the ECB’s stimulus, the repositioning of Japanese pension assets from JGBs to equites has been forgotten. At least part of the reason for this is because the Nikkei-225 has been so quiet but this transition presents a powerful source of additional demand during occasional market setbacks. 

The Topix 2nd Section of smaller companies continues to outperform the wider market 

The Nikkei-225 broke out of a medium-term range in October and found support this week in the region of 16,500. A sustained move below the trend mean, currently near 16,000 would be required to question medium-term upside potential. 

US investors have tended to focus on DXJ as a hedged vehicle while the iShares MSCI Japan Monthly GBP Hedged ETF (UJPH) offers similar exposure for UK investors.