Overview
- Government data released Tuesday showed the economy expanded 2.1% at an annualized pace in Q1, with 0.5% quarter‑on‑quarter growth that beat market forecasts.
- Household spending rose 0.3%, exports minus imports added 0.3 percentage point to growth, and business investment increased 0.3%.
- The Bank of Japan on May 7 cut its growth view for fiscal 2026 to 0.5% and lifted its core inflation outlook to 2.8% due to higher oil costs.
- Reuters reported Tokyo is likely to issue new debt for an extra budget to subsidize energy bills, a step meant to shield households and firms from rising fuel prices.
- Analysts expect growth to weaken as the Middle East conflict disrupts oil flows and lifts prices, a risk that hits Japan hard because it relies on imported crude for most of its energy.