Japan's economy grows at annualized 2.1% rate in first quarter, beating expectations

Key points

• Residential and commercial properties near the Shibuya district of Tokyo on May 4, 2023. Japan's economy grew at an annualized 2.1% in the first quarter of 2026, surpassing analysts' expectations, on the back of improved consumption and strong exports.
• The growth was sharply higher compared with Reuters-polled analysts' average estimate of 1.7%, and against the 1.3% in the previous quarter.
• On a quarter-on-quarter basis, the economy expanded 0.5%, government data released Tuesday showed, compared with estimates of 0.4%, and improving from the 0.3% growth at the end of 2025. GDP expanded 0.6%, year on year.
• These figures do not capture the full impact of the Iran war, which started at the end of February.
• "Though Japan's GDP grew healthily by 0.5% in Q1, we think the Q1 GDP is already in the rear-view mirror and expect the economy to feel the strains from high energy costs ahead," Norihiro Yamaguchi, lead...