Japan GDP slows more than expected, bond yields hit 30-year high

(Sharecast News) - Japanese economic growth slowed more than expected in the second quarter of 2026, according to figures released on Monday from the country's Cabinet Office, while expectations of higher interest rates lifted bond yields to a 30-year high. Real gross domestic product expanded by 0.3% over the April to June period, easing from the 0.5% growth registered in the first quarter.

That was the third straight quarter-on-quarter increase in economic activity, but short of the 0.5% growth rate expected by analysts.

In year-on-year terms, GDP growth slowed to 1.1% in the second quarter from 1.8% previously, missing the 2.0% consensus forecast.

Private consumption across Japan was flat compared with the first quarter, after growing 0.5% previously, while the decline in capital expenditure accelerated to -1.2% from -1.0%. That resulted in domestic demand having a negative 0.2 percentage-point impact on overall GDP growth.

The disappointing data will add pressure on the Bank of Japan to contain inflationary pressures given the current weakness in the yen, with growing rate-hike bets pushing the country's 10-year bond yield to its highest since September 1996 on Monday.

The 10-year JGB yield hit 2.930%, up from 2.880% the day before, while the two-year yield rose 4.0 basis points to 1.690%, amid rising expectations that the BoJ will tighten monetary policy at its next meeting in September.