Japan's Economy Expanded 1.1% on an Annualized Basis in the Second Quarter as Exports Offset Weak Domestic Demand
Japan's economy grew at an annualized rate of 1.1% in the second quarter of 2026, missing analyst expectations of 1.67% growth. According to data released by the Cabinet Office, the real GDP grew 0.3% from the first quarter to the second quarter. While strong exports, particularly in autos and semiconductors, contributed 0.5 percentage points to growth, domestic demand was weighed down by flat private consumption and a 1.2% drop in capital expenditures. Norihiro Yamaguchi, lead economist for Japan at Oxford Economics, noted that the growth was impacted by high energy costs resulting from the war in Iran, which has pushed up crude oil prices. The weak Japanese yen also played a dual role, boosting the overseas earnings of exporters like Toyota Motor Corp. while making imports more expensive for consumers. The Bank of Japan is currently monitoring these figures as it prepares for upcoming interest rate decisions to normalize monetary policy. Prime Minister Sanae Takaichi has expressed commitment to getting growth going again despite the cooling domestic demand.