Japanese govt bonds close higher in muted trade after stimulus package

TOKYO (AFX-ASIA1) - Government bond prices were higher in muted closing trade after the government and ruling parties finally agreed to a planned stimulus package that disappointed the equity market, dealers said.	    The package includes tax breaks on securities and land transactions, targets for the write off of banks' bad loans and the creation of a fund to buy banks' cross-shareholdings.	    The decision by Prime Minister Yoshiro Mori to resign had little impact on the market.	    The yield on the 10-year No 230 issue was quoted at 1.270 pct, from 1.295 yesterday, while the yield on the 10-year No 229 issue was at 1.220 pct, from 1.265. The June futures contract was up 0.23 at 139.11.	    "Any direct impact (of the stimulus package) on the bond market should be limited given expectations of only small-scale fiscal expenditure, unlikely to exceed 1 trn yen," Barclays Capital said in a note after the agreement.	    "One uncertainty related to the stock purchasing fund, however, is the quest ion of government guarantees," it said.	    "If such guarantees were extended, a drop in share prices would ultimately mean an increased burden on Japanese taxpayers. The timing and size of such guarantees remains unclear.	    "Over the short term, movements will likely depend on the reaction in the stockmarket," it said. 

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