Japan’s economy notches 1.1% growth rate as spending dips 1.2% and PM sinks in polling
Net exports supplied 0.5 point of Japan’s 0.3% quarterly GDP gain as consumption stayed flat and business investment fell 1.2%.
Japan's economy expanded by 1.1% in the April-June quarter, despite private consumption remaining stagnant and exports contracting, according to newly released government data. The economy's real GDP, or gross domestic product, grew by 0.3% seasonally adjusted from the first to second quarter of 2026, showing a deceleration from 2.1% growth in the previous quarter.
Private spending declined by 1.2% compared to the same period a year earlier, while exports expanded by 0.5%, largely driven by global demand for Japanese automobiles and semiconductors. The latter is supported by the rising demand for computer chips fueled by the burgeoning interest in artificial intelligence. However, government consumption increased by 1.6% in the latest quarter.
The Japanese economy has been adversely affected by the ongoing Iran war, which has led to soaring energy costs, particularly impacting Japan's oil imports since the Strait of Hormuz, a crucial transport route for Persian Gulf oil, has been effectively blocked due to the conflict. The country has released some oil reserves and is exploring alternative routes, but Brent crude is trading around $88 a barrel, up from $65 a year ago.
A weaker yen has aided some Japanese companies, such as auto giants Toyota and Honda, by increasing the value of their overseas earnings when converted back to yen. However, this currency devaluation makes the cost of raw materials more expensive, which could strain consumer spending and dampen economic growth. Prime Minister Sanae Takaichi has been advocating for a resurgence in growth, but her approval ratings, while still higher than some of her predecessors, have been gradually declining.
The U.S. dollar has been hovering near 160 Japanese yen levels, up from around 145 yen a year ago, after the economic data release. The Bank of Japan recently upgraded its economic growth forecast for the fiscal year ending in March 2027 to a modest 0.6% from 0.5% previously.
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