Japan GDP grows faster than expected in Q1 2026 amid Middle East risks

Japan's economy grew faster than expected in the first quarter of 2026, according to official data released Tuesday, but officials and analysts warn that escalating conflict in the Middle East threatens to derail the recovery. The world's fourth-largest economy expanded by 0.5 percent from the previous quarter, exceeding market forecasts of 0.4 percent. On an annualized basis, growth was 2.1 percent.

The expansion was driven by increases in private consumption, capital expenditure, and net exports. Private consumption, which accounts for more than half of Japan's GDP, rose 0.3 percent. Capital expenditure grew 0.3 percent, and net external demand added 0.3 percentage points to overall growth. This followed a revised growth rate of 0.2 percent in the final quarter of 2025.

Despite the positive data, the outlook has been clouded by the conflict in the Middle East, which has disrupted global energy supplies and sent oil prices soaring. Japan relies on the Middle East for approximately 95 percent of its oil imports. The government's top spokesman, Minoru Kihara, told reporters that Prime Minister Sanae Takaichi has instructed the finance minister to consider arrangements to minimize...