Japan stocks, bond futures edge higher ahead of BOJ policy decision

By Kevin Buckland TOKYO, Jan 23 (Reuters) - Japanese stocks edged higher along with government bond futures on Friday, with investors taking early cues from U.S. markets ahead of a Bank of Japan policy decision later in the day. The Nikkei (.N225) was slightly above flat after the first 10 minutes of trading, having opened around 0.3% higher. The broader Topix (.TOPX) was up 0.3%. Benchmark 10-year Japanese government bond (JGB) futures (2JGBv1) added 0.05 yen to 131.65 yen. Cash bonds had yet to trade. Overnight, easing tensions surrounding the United States’ bid to control Greenland helped Wall Street’s S&P 500 (.SPX) advance 0.5%, and 10-year Treasury yields (US10YT=RR) pulled back sharply from five-month peaks as investors that had shunned U.S. assets returned. Yields fall when bond prices rise. The yen (JPY=) slipped 0.1% to 158.525 per U.S. dollar, continuing its very gentle drift lower over the past four sessions. The BOJ is widely expected to keep its policy interest rate unchanged at 0.75% on Friday, after raising it to that level at its previous meeting last month. Attention will therefore turn to the central bank’s quarterly outlook report and Governor Kazuo Ueda’s post-meeting press conference at 0630 GMT. The BOJ does not announce its policy decision at a fixed time, but it is expected between 0330 and 0500 GMT. In the quarterly outlook report, the BOJ will likely raise its growth forecast for the fiscal year beginning in April, and maintain its view the economy will remain on course for a moderate recovery, sources have told Reuters. The central bank is also expected to maintain its pledge to keep raising rates if economic and price developments move in line with its projections. Prime Minister Sanae Takaichi plans to dissolve parliament on Friday to make way for snap elections on February 8, in a gamble that she can capitalize on her personal popularity among investors to expand her government’s slim majority. She has pledged to strengthen her expansionary fiscal policy and suspend the 8% sales tax on food, stoking fears of additional debt issuance that led long-term JGB yields to spike to record highs this week.