Overview
- Government data Tuesday showed the economy grew 0.5% on the quarter, or 2.1% annualized, marking a second straight expansion that beat a 1.7% forecast.
- Spending by households rose 0.3%, business investment climbed 0.3%, and trade added 0.3 percentage point to growth, pointing to broad-based early-year momentum.
- The conflict around Iran has choked flows through the Strait of Hormuz, lifting crude prices and quickly raising Japan’s fuel bills because it imports most of its oil from the Middle East.
- The Bank of Japan cut its fiscal 2026 growth outlook to 0.5% and lifted core inflation to 2.8%, and some economists now see a possible second-quarter contraction that could delay a June rate rise.
- Officials are preparing fiscal cushions such as an extra budget and energy subsidies, with Economy Minister Minoru Kiuchi pledging nimble action, as the yen weakens toward 159 per dollar and intervention risks stay in focus.