Japan economy grows faster than expected in first quarter

Japanese economic growth surpassed expectations at the start of 2026, preliminary official data showed Tuesday.

Gross domestic product (GDP) in the world's fourth-biggest economy expanded 0.5 percent in the first quarter, exceeding market forecasts of 0.4 percent.

The data came as Prime Minister Sanae Takaichi plans to draft an extra budget in a bid to safeguard any growth as consumers face soaring prices of everything from energy to rice due to the Middle East war.


Growth in private consumption and corporate investment contributed to the first quarter expansion, according to the cabinet office data.

It follows an expansion of 0.2 percent -- revised downwards from an earlier reading of 0.3 percent -- in the last quarter of 2025.

However Marcel Thieliant of Capital Economics warned the Middle East conflict was likely to impact data going forward.

"Japan's economy approached the Iran war with solid momentum but we think that GDP growth will grind to a halt this quarter and next," he wrote in a note.

Japan has been trying to slow the rise of oil prices with government subsidies, but the nation is likely to feel the full impact of soaring energy prices in months ahead, Thieliant said.

The country depends on the Middle East for around 95 percent of its oil imports.

Already consumer confidence has begun to slump, Thieliant added.

The Bank of Japan (BoJ) said it expected consumer prices to rise 2.8 percent in the current fiscal year, compared with the 1.9 percent previously forecast, while it lifted next year's outlook to 2.3 percent from 2.0 percent.

It also slashed its fiscal 2026 growth forecast to 0.5 percent from 1.0 percent, and for next year trimmed its projection to 0.7 percent from 0.8 percent.

Japan is also believed to have spent tens of billions of dollar 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.