Japan's economy expands at a 2.1% annual pace, boosted by consumer
spending
[May 19, 2026] By
YURI KAGEYAMA
TOKYO (AP) — The Japanese economy grew at an annualized rate of 2.1% in
the January-March quarter, the government said Tuesday, showing its
resilience despite rising energy prices because of the war in Iran.
Japan’s real gross domestic product, or GDP, the sum value of a nation’s
goods and services, grew at a seasonally adjusted 0.5% from the previous
quarter. It was the second straight quarter of growth. The annualized
number shows what the growth, or contraction, would have been if the
quarterly rate continued for a year.
Increased spending by consumers and businesses helped contribute to the
stronger than expected results. Higher government spending also
supported the expansion.
Private consumption rose 0.3% quarter-on-quarter, or at an annualized
rate of 1.1%, according to the preliminary data from the Cabinet Office.
Public demand rose 0.3% from the previous quarter.
Japan’s economy contracted in July-September last year, then eked out
moderate growth in October-December of 0.2% on-quarter.
A big challenge for resource-poor Japan is soaring oil prices. Brent
crude, trading at levels of about $70 a barrel before the war, has
recently cost nearly $110 a barrel.
The Strait of Hormuz, a vital transport route for oil exports from the
Persian Gulf to Asia, has been effectively blocked due to the war,
pushing prices higher. Japan has released some oil reserves and is
working on alternate routes.
For the latest quarter, Japan's overall imports grew 0.5%, while exports
increased 1.7%.
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 A shortage of an oil-related product
called naphtha, used in everything from bathtubs to plastics, has
been grabbing headlines in Japan.
Prime Minister Sanae Takaichi has promised to work
on ensuring ample supplies to keep growth going. That would likely
require considerable government spending.
Analysts at the Japan Center for Economic Research said in a recent
report that Japan will likely manage moderate levels of growth,
helped by increased spending on artificial intelligence technology
and defense.
“The breadth of demand showed a high-quality growth picture, which
may add evidence that inflation is broadening,” said Amova Asset
Management Chief Global Strategist Naomi Fink.
Higher costs for energy are helping to push prices higher and the
stronger growth in the first quarter of the year may tilt Japan's
central bank toward raising interest rates as it shifts away from
years of keeping rates near or below zero.
Japan’s inflation rate is lower than that in the U.S., but wages for
workers still lag behind increasing prices.
Tokyo’s benchmark Nikkei 225, which has been trading at record highs
lately, declined 0.6% in Tuesday morning trading.
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