MUMBAI - Indian government bond yields eased marginally on Wednesday, tracking global peers, following the Bank of Japan's (BOJ) policy decision to retain its yield curve control targets.

The benchmark 10-year yield ended at 7.3243%, after closing higher at 7.3335% on Tuesday. The yield rose by an aggregate of five basis points (bps) in the last three sessions.

"There was some buying, tracking moves in other bond yields after the BOJ decision," said Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank. "Broadly, caution will still prevail till the federal budget announcement," he added.

Earlier in the day, the BOJ said it will keep its yield curve control targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, unchanged.

The BOJ also made no change in its guidance that allows the 10-year bond yield to move 50 bps on either side of its 0% target, even as market participants expected it would phase out its stimulus programme due to rising inflationary pressure.

The 10-year U.S. yield declined below the critical 3.50% handle after the decision and was last trading at 3.4850%.

Indian government bond yields could start climbing from April, with the benchmark 10-year notes trading in 7.50%-7.75% range in April-June, Ashish Agrawal, head of FX and EM macro strategy research, Asia, Barclays, told Reuters.

Major focus continued to remain on the Union budget to be tabled on Feb. 1 with an eye on the government's fiscal consolidation path and its borrowing calendar for the next fiscal.

Agrawal said the government may gross borrow a record 16.80 trillion rupees ($206.39 billion), aiming a fiscal deficit target of 5.8% of gross domestic product.

Besides, traders will keep an eye on the movement in oil prices that went up on hopes that a relaxation in China's strict COVID-19 curbs will lead to a recovery in fuel demand in the world's top importer.

The benchmark Brent crude contract has risen in six of the last seven sessions until Tuesday and was at $86.70 per barrel.

($1 = 81.4000 Indian rupees)

(Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)