Japan’s GDP grows by 0.5% in the first quarter, exceeding expectations

Tuesday 19 May 2026 - 07:45

Japan recorded economic growth of 0.5% during the first quarter of 2026, according to preliminary official data released on Tuesday, surpassing analysts’ expectations.

The Japanese economy had previously expanded by 0.2% during the final quarter of 2025, while economists had forecast growth of around 0.4% for the beginning of 2026. The stronger-than-expected performance was mainly supported by domestic demand, public investment, and improving trade activity.

The economic stimulus package worth 117 billion euros, introduced at the end of 2025 by the government of Prime Minister Sanae Takaichi, continued to support consumer spending and business activity. The measures were designed to reduce the impact of persistent inflation on households and companies.

Economists noted that household consumption and capital investment remained moderately positive, while public spending increased significantly during the quarter. External trade also contributed to the recovery, particularly through stronger exports to Asian markets and improved automobile sales to the United States.

However, concerns remain over the possible economic consequences of tensions in the Middle East. Japan relies heavily on oil and gas imports from Gulf countries, making its economy vulnerable to rising energy prices and supply disruptions.

The conflict around Iran has affected shipping routes in the Strait of Hormuz, contributing to higher global oil prices. Analysts warn that the increase in energy costs could eventually push food and consumer prices even higher in Japan.

Inflation in Japan accelerated to 1.8% in March, excluding fresh food products, while the Bank of Japan recently raised its inflation forecast to 2.8% for the current fiscal year. The central bank also lowered its growth forecast for 2026, citing uncertainty linked to geopolitical tensions and energy markets.

Prime Minister Sanae Takaichi announced that the government is considering an additional budget package aimed at protecting consumers from rising living costs and maintaining economic momentum throughout the year.