Japan’s GDP Grows 0.3% in Q2, Misses Analysts’ Forecasts

Japan's economy grew by 0.3% in the second quarter of 2026, according to data released by the Cabinet Office on Monday. This growth marks the third consecutive quarter of expansion but falls short of the 0.5% growth forecast by analysts, as well as the previous quarter's growth of 0.5%. On an annualized basis, GDP expanded by 1.1%, which is significantly lower than the expected 1.67% growth from a survey of economists conducted by the Japan Center for Economic Research.

Consumption and Capital Spending

Private consumption remained flat in real terms, while capital expenditures decreased by 1.2% on a non-annualized basis, a sharper decline than the revised 1% drop in the previous quarter. The performance of capital investment missed expectations, which had predicted a 0.5% increase. Keiji Kanda, chief economist at Daiwa Institute of Research, noted that the weak consumption figures reflect a reluctance among consumers to spend amid rising living costs. The decline in nondurable goods consumption was larger than anticipated, indicating a broader concern for domestic demand.

Economic Outlook

The slowdown in growth comes amid rising energy costs linked to the ongoing conflict in the Middle East, which has affected fuel prices and disrupted supply chains. Norihiro Yamaguchi, lead economist for Japan at Oxford Economics, expressed concerns about sluggish growth in the latter half of 2026, as companies are likely to pass on rising energy costs to consumers. He stated, "Although AI-related goods exports will continue to stay robust in the near term, sluggish non-AI-related global economic activities will limit overall export gains."

Related coverage: UK GDP Grows 0.4% Amid Iran War Energy Price Pressures.

Based on reporting by: aljazeera.com, businesstimes.com.sg