* ECB may talk of rosier economic outlook
* Could pave way for monetary tightening signals
* BOJ most optimistic about economy in nine years
* Investors say ECB not concerned about market fallout
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By John Geddie
LONDON, April 27 Euro zone government bond
yields nudged up on Thursday with the bloc's central bank
expected to reiterate Japan's acknowledgment of better growth
prospects in a move that could pave the way towards tighter
The European Central Bank's meeting on Thursday comes
immediately after the Bank of Japan overnight offered its most
optimistic assessment of the economy in nine years.
While the BOJ kept monetary policy unchanged, for the first
time since 2008 it used the word "expansion" in describing the
state of the economy, signalling that it sees no need for
The ECB is also expected to keep its ultra-easy stance
firmly in place but may talk of a rosier economic outlook,
setting the stage for a small signal as early as June about an
eventual reduction of stimulus.
That could involve interest rate hikes and a slow withdrawal
of its asset purchase scheme likely to precipitate a decline in
the value of bonds and a rise in yields.
David Lloyd of British asset management firm M&G Investments
said that his "conversations with central bank staffers" suggest
the ECB is not concerned about market ructions that tightening
policy would cause.
"Any sense of systemic risk, like the vulnerability of major
financial institutions, they are all over that like a rash. But
if we get a massive sell-off in the bond market and people lose
money then they are entirely relaxed about that," said Lloyd,
the firm's head of institutional portfolio management.
Benchmark German Bund yields -- which move inversely to
prices -- climbed 2 basis points to 0.37 percent in early trades
on Thursday, heading back towards 14-month highs of 0.51 percent
seen in the wake of the ECB's last meeting at which it signalled
a diminishing urgency for policy action.
Policymakers tried to downplay those signals in the wake of
that meeting, while nerves around the French election and
disappointing economic data have since reversed some of the
yield rise and tempered rate hike expectations.
But Reuters reported this week that policymakers, relieved
after the first round of France's presidential vote put a
pro-euro centrist in pole position, may in June once again
change the wording of the ECB's opening statement.
Any comments on Thursday about the bloc's improving economic
prospects could be a nod to that, but some investors still feel
the data is too weak to justify a major policy shift.
"Should inflation go back towards the 2 percent target, the
ECB would need to be more hawkish – that is obvious," said Eric
Vanraes, a fund manager at investment fund EI Sturdza. "But
inflation is slowing now so the ECB is likely to stay in
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Dhara Ranasinghe; editing by John