Prices of 20-year bonds dipped, as investors prepared for next week's sale of that maturity.

The Federal Reserve is expected to announce a new round of Treasury securities purchases at the conclusion of its two-day meeting on Wednesday. Half the respondents in a Reuters poll on Friday said they expected $45 billion per month.

"I think people expect the Fed to increase their purchases in Treasuries, which is going to lead to balance sheet expansion, in which case the BOJ has to act, if they're going to play catch-up with the Fed," said Shogo Fujita, chief Japan bond strategist at Bank of America Merrill Lynch.

"If they don't do it this month, it'll be next month, if they do it this month, they'll probably have to do it again in February," he said, referring to the BOJ, which meets Dec. 19-20.

The BOJ will most likely increase its asset-buying and lending programme, currently at 91 trillion yen ($1.1 trillion), by another 5-10 trillion yen, sources have said.

Japan's election on Sunday is also likely to set the stage for more pressure on the BOJ to take further easing steps. The opposition Liberal Democratic Party is likely to secure a majority in Sunday's general election and push the central bank to do more.

Yields on 10-year JGBs were flat at 0.700 percent after touching 0.685 percent last week, their lowest since June 2003.

Yields on benchmark cash bonds ended 2011 at 0.980 percent. Ten-year JGB futures for March ended morning trade down 0.03 point at 144.62 point.

Yields on 30-year JGBs were flat at 1.895 percent, while the 20-year yield added 1 basis point to 1.665 percent. The ministry will also offer 2.5 trillion yen of 5-year notes on Thursday. The 5-year yield was flat at 0.16 percent.

On the data front, Japan's core machinery orders rose for the first time in three months in October, but fell short of forecasts. The JGB market showed no reaction to news that a rocket launched by North Korea on Wednesday appeared to have passed over Okinawa.

Center>Copyright Reuters, 2012