Japanese economic growth surpassed expectations at the start of 2026, with gross domestic product (GDP) expanding 0.5% in the first quarter, exceeding market forecasts of 0.4%. Growth in private consumption and corporate investment contributed to the expansion. The data came as Prime Minister Sanae Takaichi plans to draft a supplementary budget in a bid to safeguard growth, as consumers face soaring prices of everything from energy to rice due to the Middle East conflict. Marcel Thieliant of Capital Economics warned the Middle East conflict was likely to impact data going forward, with Japan's economy approaching the Iran war with solid momentum but likely to grind to a halt this quarter and next.
Japanese economic growth surpassed expectations at the start of 2026, official data showed on Tuesday, with gross domestic product (GDP) expanding 0.5% in the first quarter, exceeding market forecasts of 0.4%.
Growth in private consumption and corporate investment contributed to the expansion. The data came as Prime Minister Sanae Takaichi plans to draft a supplementary budget in a bid to safeguard growth, as consumers face soaring prices of everything from energy to rice due to the Middle East conflict.
Marcel Thieliant of Capital Economics warned the Middle East conflict was likely to impact data going forward, with Japan's economy approaching the Iran war with solid momentum but likely to grind to a halt this quarter and next. The Bank of Japan (BOJ) expected consumer prices to rise 2.8% in the current fiscal year, compared with the 1.9% previously forecast, due to the impact of the conflict. It also slashed its fiscal 2026 growth forecast to 0.5% from 1.0%.
Expectations of monetary tightening, along with concerns over Takaichi's fiscal policy, have helped drive a sharp rise in Japanese government bond yields in recent days. Japan is also believed to have spent tens of billions of dollars in the market to boost the value of the yen, which has weakened in recent months due to the global uncertainty, as well as the gap between US and Japanese interest rates.
A weaker yen makes the cost of imports more expensive in Japan, which relies on foreign countries for much of its energy and food needs
Japanese Economic Growth Middle East War Inflation Private Consumption Corporate Investment Gross Domestic Product (GDP) Prime Minister Sanae Takaichi Supplementary Budget Consumer Confidence Consumer Prices Bank Of Japan (BOJ) Interest Rates Yen Energy Prices Rice Prices Middle East Conflict Disruptions In Logistics Terms Of Trade Corporate Profits Real Purchasing Power Of Households Japanese Government Bond Yields Global Uncertainty Gap Between US And Japanese Interest Rates
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