Shinzo Abe, the head of Japan's Liberal Democratic Party and front runner in the election, said on Thursday he wanted the BOJ to consider zero or sub-zero interest rates.

Prime Minister Yoshihiko Noda is expected to dissolve the lower house of parliament on Friday for an election on Dec. 16. Opinion polls have shown the LDP leading Noda's Democratic Party of Japan.

Short-dated notes reacted strongly to his comments, with the five-year bond yield falling 0.5 basis point to 0.180 percent, edging near a nine-year low of 0.165 percent hit in August.

Benchmark euroyen futures also hit a four-month high of 99.755, as Abe's comments sparked speculation that the BOJ may scrap 0.10 percent interest payments on excess reserves.

On the other hand, longer maturities dipped as Abe's remarks on easing boosted Japanese stocks and also as the LDP's policy platform for more public spending raised further concerns about Japan's already dire fiscal condition.

The 10-year yield rose 0.5 basis point to 0.735 percent , with 0.730 percent becoming strong resistance in the last few sessions.

The 20-year yield climbed 1.5 basis point to 1.685 percent , while the 30-year yield gained by the same amount to 1.950 percent.

The yield curve in the 'superlong' sector, maturities over 10 years, was at one of its steepest levels since trading in the debt achieved some liquidity.

The yield spread between 10 and 20 year bonds stood at 95 basis points, the highest level in recent years.

"People are doing this for a short-term trading purpose. In the long-run, given the US fiscal cliff and concerns about Europe, bonds will be supported," said Takeo Okuhara, fund manager at Daiwa SB Investments.