Japan Q2 2026 GDP grows 0.3%, misses forecasts

Japan's economy grew at a slower-than-expected pace in the second quarter of 2026, with official data released on Monday showing a surprise deceleration that could complicate the Bank of Japan's plans to raise interest rates further. Gross domestic product expanded 0.3 percent on a quarter-on-quarter basis during the April to June period, according to the Cabinet Office, down from a 0.5 percent expansion in the first quarter and missing market forecasts for a similar 0.5 percent increase. On an annualized basis, the world's fourth-largest economy grew by 1.1 percent, well below expectations of around 2.0 percent.

The slowdown was driven by broad-based weakness in domestic demand. Private consumption, which accounts for more than half of Japan's economic output, was flat in real terms, missing forecasts for modest growth. Capital spending also disappointed, falling 1.2 percent on the quarter. The softness in consumption and investment was only partly offset by resilient exports, which contributed 0.5 percentage points to overall growth. Official data indicated that net external demand was a positive factor, supported by robust shipments of automobiles and semiconductor-related...