TOKYO: Japanese government bond yields rose slightly on Friday across the yield curve as market players squared their positions ahead of a long weekend and the Bank of Japan's policy review next week.
The benchmark 10-year JGB yield rose 1.0 basis point to minus 0.035 percent, though it was down 1.5 basis points on the week.
Yields on shorter maturities rose, stepping back from six-week lows touched earlier this week.
The short-term yields had dropped on expectations that the BOJ could cut interest rates further from the current target of minus 0.10 percent as early as next week.
The five-year yield rose 1.0 basis point to minus 0.200 percent, off Thursday's six-week low of minus 0.215 percent while the two-year yield ticked up 1.0 basis point to minus 0.265 percent after having dipped to as low as minus 0.280 percent earlier this week.
Yields on longer-dated bonds, which have suffered from expectations the BOJ will likely aim to steepen the yield curve to reduce the pain on financial institutions from its negative interest rates, also edged up.
The 20-year yield rose 0.5 basis point to 0.450 percent , though it was still below Wednesday's six-month high of 0.495 percent.
The 30-year yield rose one basis point to 0.555 percent , though it stayed below Wednesday's 0.605 percent.
While the BOJ is widely expected to combine a cut in short-term rates with an attempt to steepen the yield curve, possibly by making its bond buying target more flexible, in its next easing, market players say uncertainty surrounding its policy meeting on Sept 20-21 is unusually large.
Some investors doubt the BOJ will act next week, given that there has been little change in Japan's economic fundamentals since the last policy meeting.
It is not exactly clear how the BOJ can control the longer end of the yield curve if it wished to, as long-date bond yields tend to be influenced not just by the central bank's policy but also other factors, including inflation expectations, bond yields in other countries and the strength of demand from domestic investors.
Many traders say, therefore, they want to have a neutral position, going into the BOJ's meeting, which starts on Tuesday after a public holiday on Monday.
The 10-year JGB futures price dipped 0.02 point to 151.70 .
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