Japan’s economy grew faster than expected in early 2026, preliminary official data showed on Tuesday.
Gross domestic product in the world’s fourth-largest economy grew 0.5% in the first quarter, beating market forecasts of 0.4%.
The data comes as Japanese Prime Minister Sanae Takaichi plans to draft an extra budget to safeguard economic growth as consumers face soaring prices for everything from energy to rice due to war in the Middle East.
Growth in private consumption and business investment drove the expansion in the first quarter, according to Cabinet Office data.
Before that, growth in the final quarter of 2025 was 0.2%, revised downwards from an earlier 0.3%.
However Marcel Thiliant of Capital Economics warned that conflict in the Middle East could affect future data.
“The Japanese economy is responding to the Iran war with strong momentum, but we believe GDP growth will stall this quarter and next,” he wrote in a note.
Tilliente said Japan has been trying to slow rising oil prices through government subsidies, but the country will likely feel the full impact of soaring energy prices in the coming months.
The country relies on the Middle East for about 95% of its oil imports.
Tilliente added that consumer confidence has begun to slip.
The Bank of Japan said it expected consumer prices to rise 2.8% this fiscal year, up from its previous forecast of 1.9%, while raising its forecast for next year to 2.3% from 2.0%.
It also cut its growth forecast for fiscal 2026 to 0.5% from 1.0% and next year’s growth forecast to 0.7% from 0.8%.
Japan is also believed to have spent tens of billions of dollars in the market to boost the value of the yen, which has fallen in recent months due to global uncertainty and the interest rate gap between the United States and Japan.
A weaker yen makes imports more expensive for Japan, which relies on foreign countries for much of its energy and food needs.
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This article was generated from automated news agency feeds without modifications to the text.
