September 10-year JGB futures climbed 0.22 point to 141.64, edging closer to an eight-month high of 141.76 hit in Tuesday's evening session.

Market players said JGBs are being supported by safe-haven demand from investors as the stronger yen could hurt Japanese exporters and shares, leading to economic slowdown.

Japan's Nikkei average lost 0.4 percent on Thursday, testing major support at its 200-day moving average at 9,900.

"The rise in the yen could hurt the Japanese economy. This will add to pressure for additional monetary easing by the Bank of Japan," said Shogo Fujita, chief Japan bond strategist at Bank of America Merrill Lynch.

In cash bonds, the benchmark 10-year yield slipped 1.5 basis points to 1.085 percent, matching a seven-month low marked at the end of June.

The yield on five-year debt dropped 2 basis points to 0.380 percent despite an auction in the maturity on Thursday. Analysts says new bonds look relatively expensive on the yield curve, but that the offering was likely to be supported by demand from players including cash-rich Japanese investors amid increasing concerns on the yen's strength.

The finance ministry reopened the 0.4 percent coupon No 97 five-year JGB for the first time for Thursday's auction of the maturity. The results of the 2.4 trillion yen ($30.3 bln) sale will be released at 12:45 p.m. (0345 GMT).

Federal Reserve Chairman Ben Bernanke signaled in testimony before Congress on Wednesday that he would be ready to inject more stimulus if the US economy and inflation slow much more.

Moody's said on Wednesday it sees a "rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations."

Copyright Reuters, 2011