Avoiding Japanese bonds a risk

Japan’s benchmark bonds may gain this year, pushing 10-year yields to the lowest since August 2003, as the world’s second- largest economy struggles to emerge from its worst postwar recession and avoid a deflationary spiral, said Tomoya Masanao, a Pimco executive vice president in Tokyo.

"There is a huge risk not holding bonds," Masanao said in an interview with Bloomberg News on July 8. "The growth rate won’t rise much and inflation will remain low."

Japanese government bonds are poised to outperform Treasuries this year for the first time in a decade, according to indexes compiled by Merrill Lynch & Co. International purchases of U.S. financial assets grew more slowly in April as China, Japan and Russia pared demand for Treasuries, the U.S. government said last month.