Initial JGB market reaction was muted to data showing Japan's industrial production rose 1.4 percent in November from a month earlier, which confirmed that solid corporate activity was supporting Japan's mild recovery.
The effect of the data started to sink in later in the session when the stock market, after a lower opening, reversed course and emerged into positive territory.
The production figures followed Tuesday's core nation-wide consumer price index for November, which rose 0.1 percent from a year earlier, the first increase since October 2003.
"Since there is consensus that Japan's economy is sound, the market focus is not on such data as production, which confirms that view, but on CPI, which helps gauge the BoJ's move," said Hiroyoshi Sandaya, a JGB analyst at Goldman Sachs.
"It is difficult to push yields down much further from current levels given prospects of a Bank of Japan move" to ditch its super-easy monetary policy next year, he said.
The CPI rise fuelled expectations that Japan will soon emerge from more than seven years of deflation, paving the way for the BoJ to end its "quantitative easing" policy of flooding the banking system with excess funds. The BoJ has pledged to keep the policy until it confirms a sustained rise in nation-wide core CPI.
With the economic recovery, traders said, many investors including life insurers would become cautious about buying if the 10-year yield fell below 1.5 percent.
Key 10-year JGB futures for March delivery ended the day session down 0.24 point at 136.92, after rising nearly half a point on Tuesday.
The benchmark 10-year cash bond yield rose 3 basis points to 1.520 percent, after breaching key resistance at 1.5 percent for the first time in three weeks on Tuesday.
The five-year yield rose 1.5 basis points to 0.880 percent, with the two-year yield gained 1 basis point to 0.295 percent.
The Nikkei average ended up 1.41 percent at 16,194.61, its highest close since September 2000.
Market expectations that the BoJ could end its super-easy monetary policy by around mid-2006 will weigh more heavily on short-dated JGBs, with banks likely to step up selling as the timing of a policy shift approaches, but investors who hold bonds to maturity will likely support the market, traders said.
JGBs edged up at the opening, helped by buying by life insurers and other long-term investors after a rise in the US Treasury market, traders said.
US 10-year Treasury yields fell below two-year yields on Tuesday for the first time in five years, possibly signalling a US economic slowdown in 2006.