"Normalization of monetary policy in the coming months is nearly priced in, and the Fed will start shrinking its balance sheet in September, and this does not necessarily mean a delay of rate hikes", said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
Gains were led by blue-chip exporters, with Toyota advancing 1.22 percent to 6,263 yen and its smaller rival Nissan edging up 0.21 percent to 1,154.5 yen.
Investors have dumped euro zone government bonds over the last two weeks on expectations the European Central Bank (ECB) would unwind extraordinary stimulus sooner rather than later.
Japanese stocks ended higher Tuesday as investors waited for fresh clues on the global economy and U.S. central bank policy with Federal Reserve boss Janet Yellen's testimony later in the week in focus.
Ms. Yellen, who is scheduled to appear before Congress on Wednesday and Thursday, has taken an optimistic view of the economy in. Eastern time. The Dow Jones industrial average gained 7 points to 21,424.
KEEPING SCORE: The Standard & Poor's 500 index fell 11 points, or 0.5 percent, to 2,415 as of 11:30 a.m.
EARNINGS ON DECK: Investors were making modest moves ahead of the next corporate earnings reporting season, which ramps up this week.
International Container Terminal Services was among the biggest gainers on the index, climbing as much as 2.6 percent, after signing an agreement with a dredging company to deepen the Congo River in Africa, a move that would realise cost savings for the terminal operator from 2018.
Wells Fargo and Bank of America each lost 1 percent Tuesday.
Based on the minutes of the last Federal Open Market Committee (FOMC) released on July 5, Yellen may testify that the Fed will seek to reduce the central bank's Treasury bond holdings and mortgage-backed securities by August, effectively tightening the supply of USA dollars.
"But we are at the lower end of the range for gold prices".
With U.S. yields free to rise, the spread between 10-year Treasury and JGB yields is the widest it has been in about two months, contributing to the dollar's strength against the yen.
Among other precious metals, silver fell 0.5 percent to $15.55 per ounce, while palladium rose 0.3 percent to $842.25 per ounce.
An investor retreat from gold can be seen in holdings of physically backed exchange-traded funds, which at 54.61 million ounces are down more than 1 percent since June 14.