Japan’s Economy Grows at Annualised 2.1% Rate in Q1

• Japan’s economy grew at an annualised 2.1% in the first quarter of 2026, beating analysts’ expectations of 1.7%. Growth was supported by improved consumption and strong exports.
• On a quarter-on-quarter basis, the economy expanded 0.5%, ahead of estimates of 0.4%. This also marked an improvement from the 0.3% expansion recorded at the end of 2025.
• However, the figures do not capture the full impact of the Iran war, which started at the end of February 2026. Oxford Economics said the Q1 GDP figures are “already in the rear-view mirror,” as high energy costs are expected to weigh on the economy ahead.
• Exports grew by a better-than-expected 11.5% year-on-year in March 2026, partly driven by a 29.3% jump in shipments of semiconductor equipment. This reflects continued support from robust IT demand. Still, higher energy prices and elevated uncertainty are expected to limit consumption and investment, even as exports provide some short-term support.
• The Bank of Japan has cut its FY2026 growth forecast to 0.5% from 1.0% and raised its core inflation outlook to 2.8% from 1.9%, warning that higher crude oil prices could weigh on corporate profits and real household incomes. In addition, Tokyo is reportedly likely to issue fresh debt for an extra budget to cushion the economic blow from the Middle East war, as the country subsidises energy bills.

(Source: CNBC)