According to Jinshi Data, demand for Japan's 5-year government bond auction on Wednesday was below the 12-month average, as political risks affected investors' willingness to subscribe. The bid coverage ratio for this auction was 3.08 times, lower than the 3.17 times in December and the 12-month average of 3.54 times.

The auction took place amid a wave of bond selling triggered by Prime Minister Sanae Haga's consideration of an early general election, pushing the 5-year government bond yield to 1.615%, a record high. Most economists expect the Bank of Japan to wait until June before raising rates, but a weakening yen could increase pressure for an earlier move.

Former Bank of Japan policy board member Makoto Sakurai believes the central bank could potentially raise interest rates as early as April. Markets currently fully price in the first rate hike this year for July, but if the yen remains weak, there is room for market re-pricing.