In addition a report that Japanese banks stepped up the reduction in their JGB holdings also weighed on sentiment here.
The latest data show that the year-on-year change in the core national CPI has been at or above the zero for the past three months. This should be interpreted as a sign that Japan is emerging from deflation, and this is in line with the central bank's view.
A pullback in US Treasury prices was behind losses in JGB prices today.
Deposits stopped growing and household money is heading increasingly to risk assets and will continue to do so as long as Japanese interest rates are zero.
Falling stocks and a rising yen raises speculation among investors the central bank will avoid saying anything to add to an outlook for higher rates. It will encourage investors to buy bonds.
The bond market reacted directly to the equities market, like a textbook example.
We might see some selling in 20-year bonds before the auction.
There was some concern that the core CPI would fall back into negative territory owing to a decline in oil prices, but perhaps we don't have to worry about that scenario, as crude futures have rebounded recently.
People are paying attention to what Fukui will say. It's hard to find a reason to buy bonds as yields are rising.
The report suggests we're one step closer to the Bank of Japan's exit from its current loose monetary policy. That's negative for Japanese government bonds.
