The chances of 10-year yields soaring above 1.6 percent are high. Ten- year bonds look expensive compared with five-years and so it could take some time for dealers to sell all the bonds onto investors.

Investors who follow the index will continue to buy longer bonds.

Investors cannot justify buying bonds and they want to avoid 10-year yields going lower than 1.3 percent. There is a five-year note auction next week and investors don't want to have a low coupon on it.

Investors may start worrying that the central bank will scale back its monthly bond purchases to reduce the amount of money in the system. That will push up yields further.

Support from a lack of new supply will be short-lived.

The Nikkei is weak and that will support bonds.

The report will probably prompt investors to imagine the era of low rates is going change soon.

The upside for bonds will be heavy. Unless there is a sudden slowdown in overseas economies, Japan's economy will probably extend its recovery.

On top of a heavy auction schedule in January, if a rise in consumer prices is confirmed, the market will shift its focus to the approaching timing of a BOJ policy shift and keep up pressure especially on the shorter maturities.

Bonds will extend declines. There is no change in the fact that rates are headed higher in Japan, the U.S. and Europe.