Prime Minister Naoto Kan's decision to bring former Finance Minister Kaoru Yosano into his Cabinet signals a return to fiscal reforms that helped send benchmark bond yields to a seven-year low last August.

After Kan came to office in June pledging to limit bond sales and balance the budget, bonds yields dropped as much as 40 basis points, or 0.4 percentage point, in two months.

The appointment of Yosano, who advocates increasing the 5 percent sales tax, follows government and central bank stimulus efforts that pushed yields to the highest since May last month.