Japan's economy grows 1.8% in Q1, but Iran war clouds outlook

June 08, 2026 (MLN): Japan's economy expanded at an annualized real rate of 1.8% in the January-March quarter, revised down from an initial estimate of 2.1%, as capital investment slowed.

The downward revision reflected weaker-than-expected business investment, with capital spending falling 0.7% in the quarter revised sharply from a preliminary 0.3% increase as outlays on software and production machinery disappointed.

Real GDP grew 0.45% from the October-December period, down from the preliminary reading of 0.51%.

Despite marking a second consecutive quarter of growth, momentum is expected to stall in the April-June period, with the prolonged Iran war seen fuelling inflation, dampening private spending and disrupting petroleum product supplies.

Growth in the current quarter is forecast to hover around zero, said Yoshiki Shinke, senior executive economist at Daiichi Life Research Institute, APP reported.

Private consumption, which accounts for more than half of GDP, was revised up to 0.35% growth from 0.27%, supported by stronger dining and gaming expenditure.

Housing investment was also upgraded to a 0.9% rise from an initial 0.5%.

Exports grew 1.8% on the back of a recovery in auto shipments to the US market, while public investment was revised up slightly to 1.5%.

Japan's parliament on Friday enacted a 3.11 trillion yen ($19 billion) supplementary budget for the current fiscal year  the government's first fiscal package in response to the Middle East crisis to cushion the impact of rising energy costs.

Nominal GDP expanded at an annualized rate of 2.5%, revised down from an initial estimate of 3.4%.

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