Japan second-quarter GDP grows 1.1% on an annualized basis, missing expectations
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- Japan's economy expanded 1.1% annualized in Q2, missing the 2% consensus and decelerating from 2.1% in Q1, as softer domestic demand offset strong exports.
- Year-on-year GDP rose to 0.7% from 0.5% in the prior quarter, with the article noting this is the first full quarter reflecting the Iran war's energy-price impact on households and businesses.
- Exports beat expectations across all three months of the quarter, but the article attributes the boost to the weak yen rather than higher shipment volumes.
- The Bank of Japan raised its FY2026 (ending March 2027) GDP growth outlook marginally to 0.6% from 0.5%, warning of moderate but decelerating growth due to high crude oil prices from the Middle East conflict.
- The Nikkei 225 rose 0.43% following the data release, while the 10-year JGB yield sat at 2.88% and the yen traded at 159.1 per dollar.
- Government measures to curb oil prices for households and rising global AI-related demand — particularly in Japan's semiconductor supply chain — are expected to partially offset the energy drag.
Why it matters: Japan missed the 2% consensus while exports propped up the headline through yen weakness, not volume — meaning the headline strength is fragile. With the BoJ's own FY2026 outlook stuck at 0.6% and Middle East conflict-driven crude prices just now entering the data, the energy drag has further to run.
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