By MEGUMI FUJIKAWA TOKYO—The yield on the 10-year Japanese government bond slipped Thursday, but moves were tempered by uncertainty about whether Japan will have a new prime minister. The benchmark yield was down 0.005 percentage point at 1.120%. Makoto Yamashita, a strategist at Deutsche Securities, said it was "likely to be difficult for investors to keep buying government bonds before Tuesday," when the outcome of the ruling Democratic Party of Japan's election is settled. Ichiro Ozawa, a powerful political kingmaker, is challenging Prime Minister Naoto Kan for the DPJ leadership in a close race, the winner of which will almost certainly become prime minister. Because Mr. Ozawa has pledged that, if elected, he will implement ambitious spending plans contained in the party's 2009 election manifesto, oversupply concerns have grown rapidly in the bond market. Thus, players remain reluctant to purchase aggressively before the election, analysts say. In Friday's session, investors will likely focus on the Ministry of Finance's sale of 2.4 trillion yen ($28.6 billion) of five-year JGBs. RBS Securities strategist RuiXue Xu sees "little risk to the auction," citing the Bank of Japan's easing bias, domestic banks' holdings of ample surplus cash and an attractive valuation in the sector.

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