The economy of Japan expanded at a stronger-than-expected pace in the first quarter of 2026, as there were signs of resilience in the face of rising inflation, global uncertainty and higher energy costs amid tensions in the Middle East.
Japanese government figures showed the economy expanded 0.5% between January and March, slightly beating economists’ expectations of 0.4%. Growth was driven by stronger consumer spending and more business investment.
Japan continues to trail behind a number of large economies, especially in Asia, where countries such as India and China are still reporting more robust growth data.
Japan’s biggest challenge remains inflation and rising import costs, economists say. It imports about 95% of its oil from the Middle East and thus is very vulnerable to global fuel price shocks and supply disruptions.
The weaker yen has also made imports more expensive and driven up prices for food, electricity, and fuel across the country.
Prime Minister Sanae Takaichi, meanwhile, is considering fresh economic support measures to shield households and businesses from rising living costs.
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Here’s a comparison of projected economic growth among major economies in 2026:
| Country/Region | Projected GDP Growth (2026) | Key Drivers |
|---|---|---|
| India | 6.2% – 6.6% | Infrastructure, manufacturing, consumer demand |
| China | 4.2% – 4.4% | Exports, industrial production |
| Japan | 2.1% annualised | Consumer spending, business investment |
| United States | 2.1% – 2.3% | Technology, consumer spending |
| European Union | Below 1% | Weak demand, energy costs |
| Thailand | 2.8% | Tourism, exports |
| Hong Kong | 5.9% | Trade recovery, tourism |
Despite the positive growth, analysts warn that Japan’s economy could slow later this year if oil prices continue rising and global conflicts disrupt trade and supply chains.
The Bank of Japan has already raised its inflation forecast and signaled possible interest rate increases in the coming months as it tries to stabilise prices and support economic growth.
