Given the timing, I suspect that's more of a mukae-bi to welcome back the spirits for O-bon, rather than a bug killing technique.
A quote from the Daily Yomiuri that I found online:
As the first day of Bon approached, you'd find small bundles of straw at the florist's shops and supermarkets. On the first day of Bon, the dead are said to find their way back to their families by the light of burning straw (mukaebi or "welcoming fire"). On the last day, straw is burned again (okuribi or "send-off fire") for the dead returning to their own realm.