What are JGBs Trying to Tell Us?

Yields on 10-Year Japanese Government Bonds have fallen by about a third over the past two weeks, as shown in the chart below.

Given the tumult surrounding banks recently, and a series of relatively dismal economic data releases out of Japan, this isn’t exactly surprising. This month’s Bloomberg economic survey saw Japanese GDP forecasts fall to 1.05 and 1.1 for 2023 and 2024 respectively. Additionally, Japan reported its 19th consecutive monthly trade deficit last week, per the Wall Street Journal. Though export levels have been improving lately, a strengthening Japanese Yen could prove to be a strong headwind for further export gains. So given all this, it is not particularly surprising that JGB yields have fallen. When combined with banking chaos, speculation on changes in BoJ policy, and recent rumblings about increased taxes, this perhaps even explains the precipitous nature of the drop.