Gains were limited by supply concerns after Tuesday's lacklustre five-year auction, which was moderate but not as strong as some had expected, and ahead of Thursday's 1.1 trillion yen offering of 20-year debt.

The market expects Japan's government to increase its issuance of 20-year bonds next fiscal year beginning in April to fund rising social welfare costs.

March 10-year JGB futures, which took over as the lead contract on Monday, rose 0.02 point to 142.28 by midday.

In cash bonds, some investors have been selling into rallies, said a strategist at a Japanese brokerage. The yield on the 10-year JGBs fell back below 1.0 percent after rising above it on Tuesday, down 0.5 basis point to 0.990 percent . The five-year JGB yield declined 0.5 basis point to 0.345 percent.

The Nikkei share average fell 0.6 percent by the midday trading break, increasing the appeal of lower-risk fixed-income assets.

Demand for safe-haven debt was underpinned by new fears about the stability of Europe's sovereign debt markets and its banking system, after sources said Germany's Angela Merkel had rejected any suggestion of raising the funding limit of Europe's future bailout fund, the European Stability Mechanism.

Standard and Poor's warned last week that the ratings of 15 euro zone countries could be cut if leaders could not agree on steps to resolve the region's debt crisis.

The Federal Reserve on Tuesday held policy steady and warned that turmoil in Europe presents a big risk to the US economy, leaving the door open to possible further steps even as it noted an improvement in the US labour market. The Fed's move contributed to a late-session rally in prices of US Treasury securities.