Japanese government bond (JGB) yields edged lower on Monday, February 16, 2026, as investors reacted to underwhelming fourth-quarter growth data. The preliminary Gross Domestic Product (GDP) report showed the economy expanded at an annualized rate of only 0.2 percent. This figure fell significantly short of the 1.48 percent growth forecast by market analysts. While the result marks a return to growth after two consecutive quarters of contraction, the marginal pace suggests a fragile recovery rather than a robust rebound. The weak GDP print has immediate implications for monetary policy. Short-term bond yields declined as traders scaled back expectations for an aggressive interest rate hike in the second quarter. The Bank of Japan (BoJ) currently maintains its policy rate at 0.75 percent, a 30-year high following the December 2025 increase. Market participants are now reassessing the likelihood of an April hike. Many analysts believe the central bank may wait until June or July to act, pending more definitive results from the 2026 spring wage negotiations. Consumer spending, which makes up over half of the Japanese economy, grew by a slim 0.1 percent. This persistent weakness in private consumption continues to complicate the central bank's goal of achieving sustainable 2 percent inflation. External pressures are also weighing on the outlook. Exports fell by 0.3 percent in the final quarter of 2025. This decline was partially attributed to the impact of U.S. tariffs on automobile shipments and a notable drop in tourism arrivals. In the currency markets, the Japanese yen weakened following the data release, trading near the 153.25 level against the U.S. dollar. The currency remains volatile as it balances local economic misses against the narrowing interest rate differential with the United States. Fixed-income investors are closely monitoring the 10-year JGB yield, which has faced upward pressure from fiscal concerns under the administration of Prime Minister Sanae Takaichi. Despite the current dip in short-term yields, long-term projections suggest the 10-year yield could reach 2.3 percent by the end of 2026 if fiscal expansion continues. The upcoming January trade data and spring labor-management talks will serve as the next critical catalysts for the bond market. For now, the soft GDP figures have provided a temporary reprieve for short-term yields, forcing a more cautious "wait-and-see" approach from the BoJ.