The Bank of Japan published its May 2026 Bond Market Survey, showing that functioning in the secondary Japanese government bond (JGB) market improved from the February survey but remained below neutral overall. The diffusion index for overall market functioning rose to -16 from -26, while the index for change over the previous three months turned positive at 12 from -13, indicating that more respondents saw conditions improving than deteriorating. Liquidity indicators improved unevenly. The diffusion index for bid-ask spreads rose to -23 from -31 and for order quantity to -26 from -38, while dealing frequency was broadly unchanged at -2, the number of counterparties improved slightly to -1 from -6, and lot size improved to -12 from -15. Execution conditions also strengthened, with the index for transacting at expected prices rising to 18 from 7 and at expected dealing lots to 19 from 9. The survey, conducted from May 1 to May 12 among 77 institutions, also showed expectations for a gradual rise in yields, with the average forecast for newly issued 10-year JGBs at 2.50% at end-June 2026 and 2.77% at end-March 2029. The next survey is scheduled for publication on September 1, 2026.
Bank of Japan2026-05-20
Bank of Japan survey shows secondary JGB market functioning improved to DI -16 from -26
The Bank of Japan’s May 2026 Bond Market Survey reports improved but still sub-neutral functioning in the secondary Japanese government bond market, with the overall diffusion index rising to -16 from -26 and the three-month change index turning positive to 12. Liquidity and execution indicators strengthened unevenly, while surveyed institutions expect a gradual rise in yields, forecasting newly issued 10-year JGBs at 2.50% by end-June 2026 and 2.77% by end-March 2029.