Japan's economy grows 1.1% in Q2 2026, below expectations

Japan’s economy recorded real growth of 1.1 per cent on an annualised basis in the second quarter (Q2) of 2026, lower than market expectations, according to government data released on Monday (17/8).

On a quarterly basis, inflation-adjusted gross domestic product (GDP) rose 0.3 per cent in the April-June period.

The period was the first full quarter reflecting the impact of the conflict in the Middle East, which has driven up energy prices for businesses and households, Japan’s Cabinet Office said in its preliminary report.

Private consumption, which accounts for more than half of the economy, edged down 0.02 per cent from the previous quarter, marking the first decline in eight quarters.

Strong car and air conditioner sales were offset by a drop in electricity spending. Spending on school meals and secondary school fees also fell, following the expansion of a government subsidy programme in April, a Japanese government official said.

Meanwhile, business investment in the reporting period fell 1.2 per cent from the January-March quarter.

Exports rose 0.5 per cent, while imports fell 1.5 per cent, as crude oil shipments were disrupted by the effective closure of the Strait of Hormuz amid tensions in the Middle East.

Looking ahead, analysts warned that rising import costs and intensifying upstream price pressures could eventually be passed on to consumers, further weighing on spending later this year.