Japan's economy grows at annualized 1.1 percent in Q2, missing 2 percent expectations

Japan's economy expanded at an annualized rate of 1.1 percent in the second quarter of 2026, preliminary data from the Cabinet Office showed on Monday, 17 August. The third straight quarter of growth missed the market consensus of 2.0 percent, as reported by [TradingEconomics](https://tradingeconomics.com/japan/gdp-growth-annualized/news/575577).

Quarter on quarter, real gross domestic product rose 0.3 percent in April-June, slowing from 0.5 percent in the first quarter, revised to an annualized 1.9 percent, and below the 0.5 percent analysts had forecast. A survey of 37 economists by the Japan Center for Economic Research had projected 1.67 percent, according to [Al Jazeera](https://www.aljazeera.com/economy/2026/8/17/japans-economy-slows-missing-growth-forecasts).

Private consumption, more than half of economic output, was flat in real terms and made no contribution to growth despite government support. Capital expenditure fell 1.2 percent quarter on quarter, or 4.6 percent annualized, deepening the decline amid geopolitical tensions. Net exports added 0.5 percentage points to GDP, while domestic demand subtracted 0.2, with exports up and imports down.

The data lands as the Bank of Japan (BOJ) prepares its September rate decision. The central bank raised its benchmark rate to 1 percent in June, the highest in more than three decades, and a soft reading could complicate further tightening. Rising energy import costs from the United States-Israel war on Iran, Japan imports almost all its crude oil, and the yen's 40-year low against the dollar last month add to pressure on households.

Norihiro Yamaguchi, lead economist for Japan at Oxford Economics, expects sluggish growth in the second half of 2026 as companies pass energy costs on to consumers. “Although AI-related goods exports will continue to stay robust in the near term, sluggish non-AI-related global economic activities will limit overall export gains,” Yamaguchi said in a note to clients, as cited by Al Jazeera.

Sources

• TradingEconomics — [Japan Economy Advances at Annualized 1.1% in Q2](https://tradingeconomics.com/japan/gdp-growth-annualized/news/575577)
• Al Jazeera — [Japan's economy slows, missing growth forecasts](https://www.aljazeera.com/economy/2026/8/17/japans-economy-slows-missing-growth-forecasts)