The 10-year JGB yield fell 1.5 basis points to 0.795 percent, after falling as low as 0.790 percent, its lowest since Dec. 27. Last week, the yield touched a 4-1/2 month high of 0.840 percent.

"The market has priced in additional easing by the BOJ next week," said Naomi Muguruma, a senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities.

"Today, the cabinet will approve the supplementary budget, so the issuance schedule should be decided," she said.

"Some of the concerns about supply/demand deterioration have been relieved, so now the focus is on the BOJ's monetary policy, which encourages investors to buy JGBs on dips."

BOJ Governor Masaaki Shirakawa said on Tuesday the central bank will continue with powerful monetary easing.

Sources close to the central bank said it will consider expanding stimulus again and double its inflation target to 2 percent at its Jan. 21-22 meeting. The bank has been under pressure from new Prime Minister Shinzo Abe for bolder action to beat deflation.

The benchmark 10-year JGB futures contract ended morning trade up 0.21 point at 143.96.

The yield on the 30-year bond was flat at 2.015 percent, not far from its Friday session high of 2.025 percent, its highest since August 2011. Japanese financial markets were closed on Monday for a public holiday.

The yield on the 20-year bond inched down half a basis point to 1.785 percent, moving away from its Friday intraday high of 1.805 percent, its highest since April 2012.

A weekly gauge of sentiment in the Japanese government bond market improved in the latest week, supported by expectations of more BOJ easing steps, but remained solidly in negative territory, the latest Reuters poll showed on Tuesday.