Japan Economy Expands at Annualized 2.1% in Q1

Japan’s economy advanced at an annualized pace of 2.1% in Q1 2026, picking up from a downwardly revised 0.8% growth in Q4 and exceeding market expectations of 1.7%, a preliminary reading showed. It was the fastest yearly growth in six quarters, supported by a faster rise in private consumption and a solid contribution from net trade. Meanwhile, public investment rebounded strongly, increasing for the first time in three quarters, due to higher infrastructure and reconstruction-related spending. Government outlays increased for a second straight quarter, though the pace slowed sharply from the previous period. At the same time, capital expenditure continued to expand but lost momentum significantly, as high borrowing costs and weaker business confidence weighed on investment appetite.

Japan’s economy advanced at an annualized pace of 1.3% in Q4 2025, much stronger than the initial estimate of a 0.2% expansion and slightly above market forecasts of 1.2%. The revised figure marked a rebound from a 2.6% contraction in Q3, supported mainly by firmer domestic demand. Private consumption remained resilient despite persistent cost-of-living pressures, while government spending accelerated, partly reflecting Tokyo’s recent fiscal stimulus aimed at easing household burdens and supporting economic activity. Business investment also rebounded solidly after stagnating in the previous quarter, signaling improved corporate spending. Meanwhile, net trade did not contribute to growth, as both exports and imports remained in contraction, amid softer demand at home and abroad and lingering uncertainty after the September trade deal with the U.S. imposing a 15% baseline tariff on most Japanese goods.

Japan’s economy grew at an annualized pace of 0.2% in Q4 2025, reversing a revised 2.6% contraction in the previous quarter but missing market forecasts of a 1.6% growth, preliminary data showed. The modest rebound was supported by a recovery in business spending, a slight positive contribution from net trade, and continued government expenditure. However, private consumption, which accounts for more than half of economic output, grew the least in a year, reflecting lingering cost pressures, notably food prices, and highlighting the uneven nature of Japan’s growth momentum heading into 2026.