Japanese government bonds showed muted movement on Monday with directionless trading, as the Bank of Japan is widely anticipated to raise interest rates later this week.

The central bank's closely watched quarterly Tankan survey, released Monday, revealed that large manufacturers' sentiment hit a four-year high, reinforcing market expectations for a rate hike on Friday.

"Tankan results support gradual monetary policy normalization," said Shoki Omori, chief strategist at Mizuho Securities, noting this would underpin short-term JGB yields.

LSEG data indicates traders currently price in an 82% probability of a 25-basis-point rate increase by the BOJ on Friday.

Meanwhile, Japan's new government is preparing its largest economic stimulus package since the COVID-19 pandemic, raising concerns about fiscal health and pushing 30-year bond yields higher.