Japan's Economic Growth Slows as Bond Yields Hit 30-Year High

Japan's economic growth slowed more than expected in the second quarter of 2026, according to data released by the country's Cabinet Office. The real gross domestic product (GDP) expanded by 0.3% over the April to June period, falling short of the 0.5% growth rate predicted by analysts.

This marks the third consecutive quarter-on-quarter increase in economic activity, but the slowdown is a concern for the Bank of Japan. Private consumption was flat compared to the first quarter, while capital expenditure declined at an accelerated pace of -1.2%, contributing to a negative 0.2 percentage-point impact on overall GDP growth.

The disappointing data has pushed bond yields to a 30-year high, with the 10-year JGB yield reaching 2.930% and the two-year yield rising 4.0 basis points to 1.690%. This increase in yields is likely due to growing expectations that the Bank of Japan will tighten monetary policy at its next meeting in September.