Some market participants continued to price in the BOJ cutting the 0.1 percent interest it pays to financial institutions to park excess reserves with the central bank even though Governor Masaaki Shirakawa has said the BOJ was not thinking about making such cut.

Such expectations were due to the BOJ scrapping the minimum rates to buy short-term securities last week and the European Central Bank's move to a zero deposit rate.

The two-year JGB yield ticked down 0.5 basis point to 0.095 percent, matching a near seven-year low touched in May.

"In a sense, people are now expecting an increased probability of QE3. That has also impacted the JGB curve as a whole," said Shogo Fujita, chief Japan bond strategist at Bank of America Merrill Lynch, referring to a third straight month of declines for US retail sales.

"In that sense the US is in a QE3 mode, with the dollar/yen going lower ... deflationary pressure in Japan to persist, obviously forcing the BOJ to move and obviously putting pressure on the JGB yield curve as a whole."

Yields on 20- and 30-year bonds were flat, at 1.580 and 1.790 percent, after slipping 0.5 basis point early in the session. The 30-year yield fell 7.5 basis points last week, while that on 20-year bonds slipped 4.5 basis points.

The benchmark 10-year yield inched up 0.5 basis point to 0.770 percent, not far from a nine-year low of 0.755 percent hit on Friday, while 10-year bond futures eased 3 ticks to 144.25.

Bernanke is expected to reiterate the central bank's stance of only taking further action if economic conditions worsen, when he appears at the semi-annual congressional testimony on Tuesday and Wednesday.

"Depending in part on (Bernanke's) remarks, market speculation about the possibility of further BOJ easing could strengthen. If the market continues to behave irrationally, it is still possible that it will affect the actions of the BOJ and eventually validate the market's behaviour," Barclays Securities Japan said in a note.

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