Japanese government bond prices recovered from earlier losses after the Bank of Japan acted decisively on Friday to curb a rise in bond yields, offering "unlimited" buying in long-term Japanese government bonds.
Heavy buying of JGBs raises the price of bonds to force down their yield, an essential element of the BOJ's ultra-loose yield curve control (YCC) policy.
It was the first time in more than six months that the BOJ has conducted special operations to buy bonds to achieve the yields it wants to see, rather than the auctions used in regular operations - a powerful show of force to direct the market.
On top of that, the BOJ increased the amount of its planned buying in five- to 10-year JGBs to 450 billion yen from the 410 billion amount it has favored since late August. Following the BOJ's operations, the price of the 10-year JGB futures rose to as high as 150.31 from the day's low of 150.09. It was up 0.11 on the day.
The benchmark 10-year cash JGB yield edged down to 0.090 percent, the same level as its previous close, from 0.095 percent touched earlier.
JGB yields have risen in recent weeks, in line with global peers, on rising expectations that the world's central banks are increasingly leaning towards winding back stimulus as the global economy gains momentum.
Investors have started to speculate that the BOJ could also be moving towards an exit from ultra-easy policy, although BOJ Governor Haruhiko Kuroda has denied that he was considering such a major policy adjustment in the near future.
"I think the BOJ took pre-emptive steps to fend off further rises in JGB yields. JGB prices recovered so I think it was a success at least for now," said Naoya Oshikubo, yen rates strategist at Barclays.
"But given that the main reason for higher yields comes from foreign bonds, the market will likely remain capped," he added. Indeed the impact of the BOJ's action quickly evaporated in the currency market, on which the BOJ has less control.
The yen briefly weakened to 109.66 per dollar from around 109.45 but quickly pared its losses.