Japanese government bond prices rose on Friday, with gains in US Treasuries lifting lead futures off six-year lows, but expectations that the Bank of Japan will raise interest rates next week put a cap on prices.
Investors were also cautious ahead of US non-farm payrolls data due later in the day, as a stronger-than-expected reading could trigger selling in US bonds and weigh on JGBs next week.
Economists are forecasting a gain of 185,000 jobs in June.
With the main focus on the BOJ's July 13-14 policy meeting, hedge selling or short-covering were limited before a Ministry of Finance auction of five-year JGBs on Tuesday, traders said.
The BOJ is widely expected to raise its target for the overnight call rate for the first time in six years to 0.25 percent from zero next week.
"Buying was limited to short covering as many investors seem to think it won't be too late to create fresh positions after they confirm a BOJ rate hike next week," said a manager at a big non-life insurer. "Market players are reducing risk exposures to a minimum going into the BOJ meeting, so trading will likely be quite limited much of next week," he said.
The key September 10-year JGB futures price ended the day session up 0.25 point at 131.15, off a six-year low of 130.84 hit on Thursday.
The benchmark 10-year JGB yield dipped two basis points to 1.955 percent.
The five-year yield also fell two basis points to 1.490 percent as concerns about Tuesday's auction of 2.0 trillion yen ($17.4 billion) of five-year JGBs have subsided.
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