"The 10-year yield is likely to stay around 1.2-1.3 percent as things are calming down a bit. Many investors do not want to trade actively ahead of their book-closing (at the end of March)," said Ruixue Xu, rate strategist at RBS.

"There's talk about possible extra budget and shortfall in tax revenue. But it's still not clear how many bonds they will need to issue... My guess is that the market can absorb an extra issue of about 10 trillion yen without major shocks."