TOKYO, July 6 (Reuters) - Japan's 10-year government bond yield rose on Thursday, tracking U.S. Treasury yields, as investors turned cautious in the run-up to the Bank of Japan (BOJ)'s policy meeting at the end of this month.
The 10-year JGB yield rose 2 basis points to 0.400%.
"The yield rebounded from recent declines, which were driven by firm outcome of the 10-year bond auction earlier this week," said Naokazu Koshimizu, senior rates strategist at Nomura Securities.
"As the BOJ's policy meeting approaches, caution arises and investors sell bonds."
Koshimizu's firm expects the BOJ to tweak its yield curve control policy, under which the central bank controls the movement of the yield on the benchmark 10-year bonds, this year.
With Japan's inflation exceeding its 2% target for more than a year, expectations are building that the BOJ will soon respond by moving to adjust its extremely loose monetary policy settings.
No immediate signs of attacking the BOJ policy has been seen yet, as foreigners, who typically short cash bonds to hedge rate increase, turned net buyers of Japanese government bonds (JGBs) in the week ended July 1, after being net-sellers for two straight weeks, Ministry of Finance data showed.
U.S. Treasury yields were mostly higher overnight, after a softer-than-expected reading on U.S.-made goods and the minutes of the Federal Reserve's June policy meeting did little to alter expectations on the path of rate hikes.
The 20-year JGB yield rose 2 bps to 0.985%, while the 30-year JGB yield rose 1.5 bps to 1.215%.
The five-year yield rose 1.5 bps to 0.065%, and the two-year JGB yield was flat at -0.075%.
The 40-year JGB yield fell 1 bp to 1.380%. (Reporting by Junko Fujita; Editing by Varun H K)
