Analysts aren't necessarily holding out too much hope that Japan's investors will shift to riskier assets.
"The BOJ has hopes that negative yields will impact savings and investment behavior. And that's the big question mark here. The textbook theory says it will. There should be more willingness of businesses to invest for yields," Christian de Guzman, senior analyst for the sovereign risk group at Moody's, said Wednesday. "But this is Japan. In many ways, as in the past, they've defied a lot of the textbook."
Current global market volatility may also throw a spanner in the works.
"Japanese investors are very sensitive to global risks," he said. "When there is a risk off environment, they come right back into Japan."
The government is also likely to be able to continue selling bonds, even at negative yields.
While the BOJ is cutting out retail investors, traditional buyers of JGBs will be able to expect some profit on their purchases because the central bank will still be buying the bonds for its quantitative easing program, noted Marcel Thieliant, a Japan economist at Capital Economics.
While holding JGBs, even at negative yields, may look more attractive for banks than parking funds at the BOJ where rates are deeper in negative territory, the BOJ can always just raise its offering prices until selling the JGB looks attractive, Thieliant noted.
Any losses for the BOJ -- when the government pays back the bond at a lower price than the central bank paid for it -- likely wouldn't be felt for several years as the BOJ doesn't mark its JGBs to market, he said. Additionally, the BOJ already owns more than 50 percent of already-issued JGBs, meaning it's sitting on profitable trades to cushion any losses.
But some analysts are concerned that banks may just hold on to their JGBs as the returns are slightly more attractive than letting the funds sit at the BOJ at negative rates.
"Given that the bulk of institutional investors' remaining JGB holdings are for regulatory and ALM (asset liablity management) purposes, there will likely come a point where these holders will be unwilling to sell their JGB holdings, no matter what price the BOJ offers," HSBC said in a note Monday.
There was no sign of that Wednesday, when the BOJ's regular debt-buying operation avoided negative surprises, Reuters reported.
But HSBC said negative yields might eventually derail the BOJ's efforts at 80 trillion yen worth of quantitative easing annually, possibly as early as this year, adding that may push the central bank to cut rates deeper into negative territory.
On Thursday, BOJ Governor Haruhiko Kuroda said the risks it would face difficulties buying JGBs because of negative interest rates was likely small, according to a Reuters report.
-Nyshka Chandran contributed to this article
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1