Japan’s economy grew at a 1.1% annualized rate in the second quarter of 2026, according to official data released by the Cabinet Office on Sunday. The figure was below the median forecast of 2% growth among economists and represented a deceleration from the 2.1% growth recorded in the first quarter of the year.
On a quarter-over-quarter basis, gross domestic product (GDP) expanded by 0.3%. The year-on-year growth rate was 0.7%, an increase from the 0.5% reported in the previous quarter.
The data indicated that an increase in exports contributed to the quarter’s growth. Figures for private consumption, a key component of domestic demand, showed a decrease during the same period. This reporting period was the first to fully encompass the economic effects of the conflict in Iran, which has been linked to higher energy costs for businesses and households.
Following the release of the GDP figures, Japan’s financial markets showed varied movements. The Nikkei 225 stock index rose by 0.43%. The yield on the benchmark 10-year Japanese Government Bond was recorded at 2.88%. In currency markets, the Japanese yen traded at 159.1 against the U.S. dollar.
Earlier in August, the Bank of Japan (BOJ) updated its economic outlook, revising its GDP growth forecast for the fiscal year ending in March 2027 to 0.6% from a previous estimate of 0.5%.
In its accompanying report, the central bank stated, “Japan’s economy is expected to continue growing moderately, albeit at a decelerated rate.” The BOJ report cited high crude oil prices from the conflict in the Middle East as a contributing factor. It also noted that government measures to curb high oil prices for consumers and an increase in global demand related to artificial intelligence could partially offset these pressures, as many Japanese companies are involved in the semiconductor supply chain.
