The recent buying spree of Japanese government bonds that has pushed the key long-term interest rate to a record low will continue for at least several months, as an end to the deflationary trend is nowhere in sight, economists and analysts say.
With Japanese share prices and real estate values in a free-fall and worries over a possible U.S.-led war against Iraq stoking fear of dollar-denominated assets, financial institutions have been flocking to JGBs in their search for investments with a positive rate of return.
But that rush has already reduced the rate of return to less than 1 percent -- and driven up prices at the same time.