Source: Portal Site of Official Statistics of Japan (e-Stat)
This service uses the API function of the Portal Site of Official Statistics of Japan (e-Stat), but the content of this service is not guaranteed by the government.
This service uses statistical data published by the Bank of Japan, but the content of this service is not guaranteed by the Bank of Japan.
Real GDP in Q1 2026 rose by +0.5% quarter-on-quarter (annualized +1.8%), accelerating from +0.2% in the previous quarter. According to the Cabinet Office GDP flash estimate, the main driver of growth was a large increase in exports (QoQ +1.8%), making the external-demand-led nature of this expansion clear. By contrast, private non-residential investment turned negative, falling QoQ -0.7% for the first time in two quarters, exposing the fragility of domestic demand. Nominal GDP grew QoQ +0.6% (annualized +2.5%), outpacing real growth, while the GDP deflator remained high at +3.2% year-on-year.
The real QoQ growth of +0.5% matches Q1 2025’s pace and exceeds the median of the past 12 quarters (+0.3%). Annualized +1.8% is above Japan’s estimated potential growth rate (roughly 0.5–1.0%), but the momentum is limited compared with stronger episodes such as Q3 2024 (+2.8% annualized) and Q1 2025 (+2.0%). Time-series dynamics show a drop to QoQ -0.6% in Q3 2025 followed by recovery to +0.2% in Q4 and +0.5% in Q1 2026. Volatility of growth has narrowed; large negative swings seen in Q3 2023 (-1.4%) and Q1 2024 (-0.3%) were avoided, but the economy has not entered a robust expansion phase.
Nominal growth exceeding real growth by 0.1 percentage point suggests persistent inflationary pressures. The GDP deflator YoY +3.2% edged down slightly from +3.4% in the prior quarter but remains high, consistent with a price-rise phase that has ranged between +2.7% and +6.2% since Q2 2023.
Decomposing growth by demand components makes the external-demand-led structure evident. Exports accelerated sharply to QoQ +1.8% from +0.2% in the prior quarter, while imports rose modestly to +0.4% from flat. As a result, the net external-demand contribution is estimated at about +1.4 percentage points, accounting for most of the +0.5% real GDP increase.
Domestic demand contributed little. Private final consumption accelerated to QoQ +0.3% from +0.1% but contributed only around +0.2 percentage point. Private non-residential investment fell QoQ -0.7% (after +1.2% previously), subtracting roughly -0.1 percentage point from growth. Government demand expanded QoQ +0.5% (from +0.3%), contributing about +0.1 percentage point. Overall, domestic demand fell well short of external demand’s contribution, underscoring weak autonomous domestic expansion.
Looking back over the past 12 quarters, notable external-demand contributions occurred in Q4 2023 (exports +2.5%, imports +2.8%), Q3 2024 (exports +2.4%, imports +3.2%), and Q2 2025 (exports +1.6%, imports +1.1%); the current episode ranks alongside these as an external-demand-led phase.
Private consumption rose QoQ +0.3%, accelerating from +0.1% in the prior quarter. This is the third-highest pace among the past 12 quarters after Q1 2025 (+0.6%), Q3 2024 (+0.5%), and Q3 2025 (+0.5%), indicating a mild recovery. However, consumption is still in a recovery process from large declines in Q2–Q3 2023 (-0.9% and -0.7%), and a vigorous upturn has not materialized.
Retail sales data (METI) for monthly series from Feb 2024 through Jan 2025 show year-on-year changes ranging +0.7% to +4.7%, indicating resilience in nominal terms. December 2024 was seasonally high at ¥16.1 trillion. On a real basis, however, price increases have eroded purchasing power, which helps explain the limited real growth in GDP consumption.
The CPI (MIC) core (excluding fresh food) YoY was +2.0%, +1.6%, +1.8%, +1.4% for Jan–Apr 2026, hovering near the BOJ’s 2% price-stability target. The core-core CPI (excluding fresh food and energy) remained elevated at +2.6%, +2.5%, +2.4%, +1.9% over the same months, signaling persistent underlying inflationary pressure. This price environment is consistent with a squeeze on real consumption growth.
Private non-residential investment declined QoQ -0.7%, down sharply from +1.2% in the prior quarter, marking the first negative reading in two quarters. Among the past 12 quarters, only Q4 2024 (-0.9%) and Q1 2024 (-1.7%) showed larger declines, raising concerns about corporate investment appetite.
Machine orders (Cabinet Office, excluding private-sector shipbuilding and electric power) exhibited large swings: +5.8% MoM in Oct 2025, -9.2% in Nov, +16.1% in Dec, -5.5% in Jan 2026, +13.6% in Feb, and -9.4% in Mar. Machine orders are considered a 2–3 quarter leading indicator for GDP investment, and the Oct–Dec 2025 pattern foreshadowed the Q1 2026 investment decline. Orders in Jan–Mar 2026 remained volatile, leaving uncertainty over an investment recovery in Q2 and beyond.
The BOJ Tankan’s business sentiment DI shows large-manufacturers in manufacturing improved to +17.0 in Q1 2026 (from +15.0) and expect +15.0 going forward, while large non-manufacturers recorded +36.0. Despite generally favorable firm sentiment, the decline in capex suggests that changes in the financial environment may have constrained investment decisions.
Exports accelerated to QoQ +1.8% from +0.2% in the prior quarter, a high pace compared with the past 12 quarters (second only to Q4 2023’s +2.5% and Q3 2024’s +2.4%). Imports rose +0.4% from flat in the prior quarter, so an expansion in net exports drove growth.
Trade statistics (Ministry of Finance) show monthly export values ranging ¥8.1–10.4 trillion from May–Dec 2025, peaking at ¥10.4 trillion in December. Imports ranged ¥8.8–10.0 trillion, with ¥10.3 trillion in December. The trade balance was in surplus at ¥0.3 trillion in November and ¥0.1 trillion in December for two consecutive months, consistent with the GDP statistics’ stronger external-demand contribution.
FX conditions (BOJ) show the USD/JPY monthly average depreciating from 144.50 in Jun 2025 to 158.34 in May 2026. Especially since Oct 2025, spot rates traded in the 151–159 range, creating a favorable environment for exporters. The nominal effective exchange rate (2020=100) fell from 76.5 in Jun 2025 to 68.5 in Apr 2026, and the real effective rate declined from 74.0 to 65.7. The yen depreciation likely supported export volume growth.
The BOJ Tankan’s assumed exchange rate (all sizes, all industries) was 150.10 in Q1 2026, about ¥6.7 yen stronger than the realized average for Jan–Mar 2026 (156.81). Greater-than-expected yen weakness improved exporters’ profitability and may have boosted export volumes.
Government demand expanded QoQ +0.5% (up from +0.3%), the second-largest pace among the past 12 quarters after Q2 2024 (+2.0%), indicating fiscal spending continues to support activity. Although its contribution is modest, government demand partly offsets domestic demand weakness.
The BOJ Tankan Q1 2026 shows large-manufacturer DI at +17.0 (up 2 points) with a +15.0 outlook, and large non-manufacturers at +36.0 (up 2 points) with a +28.0 outlook. Midsize-manufacturers were stable at +16.0, and small-manufacturers improved to +7.0 (from +6.0). Overall corporate sentiment is constructive, pointing to resilience in activity.
However, the assumed exchange rate in Tankan was revised to 150.10 (from 147.06), a ¥3 shift toward yen weakness. Actual market rates were even weaker; the resulting improvement in exporters’ margins is offset by rising import costs. If firms price in further yen weakness, import-price-driven passthrough could add inflationary pressure domestically.
Despite favorable sentiment, the decline in capex suggests financial conditions may be playing a role. As detailed below, rises in the unsecured call rate and a shrinking monetary base have likely raised corporate funding costs and encouraged caution in investment decisions.
The unsecured overnight call rate (BOJ) traded in a narrow band of 0.477–0.478% from Jun–Nov 2025, rose to 0.557% in Dec, and has since traded around 0.726–0.728% from Jan 2026 onward. This sharp increase signals BOJ policy normalization. The roughly 17 basis-point increase between Dec 2025 and Jan 2026 likely reflects a tightening of policy rates.
The monetary base (end-month) fell from ¥648.0 trillion in Jun 2025 to ¥575.8 trillion in May 2026, with the year-on-year contraction widening from -3.5% to -12.2%. The reduction in the BOJ’s balance-sheet accommodation is clear, and financial conditions have turned toward tightening.
This shift in financial conditions is consistent with the capex slowdown: higher corporate funding costs have likely dampened investment decisions, contributing to the QoQ -0.7% capex outcome in Q1 2026. Continued short-term rate increases would raise the risk of further downside pressure on investment.
The Corporate Goods Price Index (CGPI, BOJ) rose from 126.5 in May 2025 to 132.8 in Apr 2026. The rise from 129.8 in Mar 2026 to 132.8 in Apr (+2.3%) is notable, reflecting upstream raw-material price pressures.
By contrast, the CPI aggregate remained largely unchanged at 112.9 in Jan 2026 to 113.0 in Apr 2026, with YoY rates of +1.5%, +1.3%, +1.5%, +1.4% over Jan–Apr. Core CPI and core-core CPI remained at +2.0%/+1.6%/+1.8%/+1.4% and +2.6%/+2.5%/+2.4%/+1.9% respectively.
The rapid rise in CGPI alongside a muted CPI response suggests firms have not fully passed upstream cost increases through to consumer prices, compressing corporate margins but helping preserve households’ real purchasing power. Still, core-core CPI at +1.9% remains close to the BOJ’s 2% target, so underlying inflation pressures persist and future passthrough merits close monitoring.
The Services Producer Price Index (SPPI) rose from 111.0 in May 2025 to 114.3 in Apr 2026, indicating rising service-sector prices that may reflect labor-cost pressures and point to wage-driven inflation dynamics.
The BOJ’s nominal effective exchange rate fell from 76.5 in Jun 2025 to 68.5 in Apr 2026, and the real effective rate declined from 74.0 to 65.7. A lower effective rate implies a broad-based weakening of the yen and raises import-price pressures. Part of the CGPI rise likely reflects higher import costs resulting from the weaker effective exchange rate.
While yen weakness supports export competitiveness, it also feeds into domestic prices via higher import costs. The GDP deflator YoY +3.2% suggests import-price increases are transmitting into the domestic price structure. Further depreciation of the effective rate would heighten inflationary pressure and risk further dampening real consumption.
As of Apr 2026, the three CPI indicators stand at: aggregate +1.4%, core +1.4%, and core-core +1.9%. The closeness of aggregate and core indicates fresh-food price effects are limited. Core-core exceeding the others by 0.5 percentage point points to downward pressure from energy prices.
From May 2025 to Apr 2026, aggregate moved from +3.5% down to +1.4%, core from +3.7% to +1.4%, and core-core from +3.3% to +1.9%—all trending lower, with declines accelerating after Nov 2025. Nonetheless, core-core remaining at +1.9% near the BOJ’s 2% target implies persistent underlying inflation.
The GDP deflator YoY +3.2% substantially exceeds CPI aggregate +1.4%. This gap reflects that the GDP deflator captures export and import price swings; yen depreciation has lifted both export and import prices. The high GDP deflator helps explain why nominal GDP growth exceeds real growth.
The CI for business conditions (Cabinet Office) shows the coincident index rising from 116.5 in Feb 2025 to 117.9 in Apr 2026, indicating improvement. The leading index climbed from 107.1 in Feb 2025 to 115.9 in Apr 2026, suggesting future expansion. The lagging index fell slightly from 111.8 to 111.2 over the same period but has been broadly flat.
The rise in the coincident index is consistent with GDP recovery, and the strong increase in the leading index supports expectations of further expansion. However, the leading index’s rapid rise from 106.9 in Aug 2025 to 112.5 in Jan 2026 has since moderated, implying the pace of expansion may slow.
Industrial production data are not included in the provided dataset, limiting detailed production analysis. Still, the rising coincident indicator implies overall production activity is holding up.
Ministry of Finance trade data show exports increased from ¥97.1 trillion in Nov 2025 to ¥104.1 trillion in Dec (+7.2% YoY), while imports rose from ¥94.0 trillion to ¥103.1 trillion (+9.7%). The trade surplus narrowed from ¥3.1 trillion in Nov to ¥0.9 trillion in Dec but remained in surplus for two months.
In GDP statistics, Q1 2026 exports rose QoQ +1.8% and imports +0.4%, with net exports expanding and driving growth. The December monthly export increase is consistent with the quarterly export rise. The difference—large monthly import growth (+9.7% YoY) versus modest quarterly import growth (+0.4% QoQ)—suggests import declines in Jan–Feb, consistent with Q4 2025 import stagnation and limited import growth in Q1 2026.
METI retail sales peaked at ¥16.1 trillion in Dec 2024, falling to ¥12.7 trillion in Jan 2025. YoY retail sales were +2.8% in Nov 2024, +3.5% in Dec, and +4.4% in Jan 2025, indicating solid nominal growth.
GDP shows private consumption QoQ +0.3% in Q1 2026, consistent with positive YoY retail sales. However, retail sales are nominal; adjusting for CPI inflation (+1.3% to +1.5% YoY) implies real retail-sales growth of roughly +2.9%–+3.1%, which exceeds the GDP consumption increase of +0.3%. This discrepancy likely reflects differences in coverage (retail sales exclude many services) and other definitional differences between the series.
Machine orders (Cabinet Office, excluding private shipbuilding and electric power) totaled ¥98.2 trillion in Jan 2026, ¥111.6 trillion in Feb, and ¥101.1 trillion in Mar—showing a large spike in Feb followed by a decline in Mar. Month-on-month rates were -5.5% in Jan, +13.6% in Feb, and -9.4% in Mar.
GDP shows private non-residential investment QoQ -0.7% in Q1 2026, consistent with the volatile orders pattern. Given machine orders’ 2–3 quarter lead on investment, the Oct–Dec 2025 order series (+5.8%, -9.2%, +16.1%) made the Q1 2026 investment decline foreseeable. The ongoing volatility in early 2026 orders leaves recovery prospects for Q2 uncertain.
Large swings in machine orders suggest firms have not settled on clear investment plans. Tightening financial conditions and heightened uncertainty are likely making firms more cautious.
Over the past 12 quarters, GDP has recovered from a trough of -1.4% QoQ in Q3 2023 to +0.7% by Q3 2024. A temporary dip to -0.6% in Q3 2025 was followed by +0.2% in Q4 and +0.5% in Q1 2026, consistent with cyclical fluctuations.
By component, private consumption has recovered from the large Q2–Q3 2023 declines and has been in the +0.0%–+0.6% range since Q3 2024. Investment rose from -1.6% in Q2 2023 to +2.1% in Q4 2023 but has since oscillated between -1.7% and +1.2%. Exports recovered from -2.9% in Q1 2024 and have fluctuated between -1.6% and +2.4% since Q3 2024.
These trends suggest Japan has not clearly entered a structurally higher growth trajectory but is instead experiencing repeated cyclical swings. Investment instability indicates firms have not anchored medium-term growth expectations. Reliance on external demand makes the economy vulnerable to overseas fluctuations.
Nominal GDP has generally exceeded real GDP, with the GDP deflator holding at high levels (+2.7%–+6.2%). With inflation persisting, the fact that real growth remains around +0.5% points to weak underlying real expansion.
TOPIX quarter-end values rose from 2323.39 in Q3 2023 to 3949.09 by Q2 2026, indicating a strong equity market. Notably, Q1 2024 saw a large quarter-on-quarter gain of +17.0%, and the market has posted successive robust quarterly gains since Q3 2025 (+10.0%, +8.6%, +2.6%, +12.9%).
Real GDP growth has sometimes been negative (Q1 2024 -0.3%, Q3 2025 -0.6%), so the correlation between equities and GDP is not tight. Equity markets respond to a range of factors—earnings expectations, monetary policy, and global market swings—so divergences from GDP growth are common.
For Q1 2026, GDP +0.5% was accompanied by TOPIX +2.6% QoQ. In Q2 the index rose further by +12.9%, suggesting the market priced in stronger recovery. Around the GDP release (2–5 June 2026), TOPIX moved from 3924.24 to 3949.09 (+0.6%), implying a generally positive market reaction to the GDP flash.
Nonetheless, whether equity gains reflect genuine real-economy improvement or are driven by monetary and external factors requires careful assessment. With BOJ policy normalization underway, the risk of widening divergence between markets and the real economy remains.
Sustained external demand: Continued decline in the effective exchange rate would further boost export competitiveness and sustain external-demand-led growth. A persistent gap between BOJ Tankan assumed rates and realized market rates could improve exporters’ profitability and eventually support capex recovery.
Improvement in corporate sentiment: The Tankan DI shows an improving trend and solid outlook. If sentiment translates into higher capex and employment, growth could shift toward a more domestic-demand-driven expansion.
Leading-index momentum: The leading index rose materially from 107.1 in Feb 2025 to 115.9 in Apr 2026, implying built-in momentum for future expansion. If realized, Q2 2026 and beyond could see faster growth.
Financial tightening: Continued increases in the unsecured call rate and a shrinking monetary base would raise corporate funding costs and risk further capex declines. Too rapid policy normalization could significantly subdue domestic demand.
Decline in real purchasing power: With the GDP deflator at +3.2% and CPI at +1.4%, if real wages fail to keep pace, consumption could be pressured. Core-core CPI remaining at +1.9% underscores the risk that persistent underlying inflation will erode real consumption.
Investment instability: Large volatility in machine orders suggests unsettled corporate investment decisions. Widening uncertainty could prolong capex weakness, reducing potential growth.
External-dependence vulnerability: The current expansion is export-led; a slowdown in global demand or yen appreciation could sharply weaken growth. Weak autonomous domestic expansion raises concerns about sustainability.
Limits to price passthrough: Rapid CGPI increases with muted CPI response indicate firms struggling to pass costs on. Ongoing margin pressure could restrain wage growth and capex, weighing on domestic demand.
A central structural challenge is weak autonomous domestic demand. Private consumption remains only a gradual recovery, and investment is volatile. Relying on external demand leaves the economy vulnerable to global cycles. As BOJ policy normalizes, higher interest burdens on firms and households could further depress domestic demand.
Sustainable growth will require a virtuous cycle with rising wages: corporate profit gains channelled into wages and investment. Whether firms allocate improved profitability to pay rises and capex will be a key determinant of future growth sustainability.
GDP deflator: A price index calculated as nominal GDP divided by real GDP. It reflects price changes for all domestically produced goods and services and, unlike CPI, includes export and import price movements. Presented year-on-year; a positive value indicates price increases, a negative value indicates price decreases.
Contribution: The contribution of each demand component (consumption, investment, exports/imports, etc.) to GDP growth. Calculated by multiplying each component's growth rate by its share in GDP. The sum of contributions equals the overall GDP growth rate.
External demand: Net exports (exports minus imports). An increase in external demand contributes positively to GDP growth, while a decrease subtracts from growth. Decomposing GDP into domestic and external demand is standard in Japanese GDP analysis.
Core CPI: Consumer Price Index excluding fresh food. The BOJ uses this indicator when assessing its 2% price-stability objective. Excluding fresh-food prices, which are volatile due to weather, helps capture underlying price trends.
Core-core CPI: Consumer Price Index excluding fresh food and energy. By excluding energy-price volatility, it measures more persistent inflationary pressure and is comparable to core inflation measures used in advanced economies.
CI for business conditions: A set of indices that indicate the amplitude and tempo of business-cycle fluctuations. It comprises leading, coincident, and lagging indices. A rising coincident index signals current expansion, while a falling one signals contraction.
Machine orders statistics: A Cabinet Office series regarded as a leading indicator for business investment. The private-sector series (excluding shipbuilding and electric power) is a core measure and is considered to lead GDP investment by 2–3 quarters due to timing from order to installation.
BOJ Tankan: The BOJ's quarterly short-term economic survey of enterprises. The business conditions DI (difference between firms reporting 'good' and 'poor') is a key sentiment indicator. A positive DI indicates improving sentiment; a negative DI indicates deterioration.
Assumed exchange rate: The exchange rate firms use in the Tankan as the basis for business plans. Deviations from actual market rates can create upside or downside effects on corporate profits. Yen depreciation relative to the assumed rate benefits exporters; appreciation harms them.
Unsecured call rate: The interest rate for unsecured short-term interbank lending. The overnight (O/N) rate is the rate for loans repaid the next day and is the BOJ’s policy-rate operating target. It is an important indicator of monetary policy stance.
Monetary base: The total currency supplied by the BOJ: currency in circulation plus BOJ current-account deposits (reserves). It expands under quantitative easing and contracts under tightening, reflecting the quantitative dimension of policy.
Corporate Goods Price Index (CGPI): A BOJ index measuring prices of goods traded between firms. It represents upstream price trends and typically leads consumer-price movements. It reflects raw-material price changes and is important for analyzing price passthrough.
Effective exchange rate: A trade-weighted average of exchange rates against multiple partner currencies. The nominal effective rate reflects only exchange-rate movements; the real effective rate also adjusts for relative price changes. A decline indicates a reduction in the yen's overall purchasing power.
TOPIX: Tokyo Stock Exchange Prime Market Index covering all listed issues; it is market-cap weighted and a representative indicator of the Japanese equity market. Its correlation with GDP growth is not necessarily strong.
This column was automatically generated by AI integrating Cabinet Office GDP data, Bank of Japan statistics, e-Stat public statistics, and market data as a macroeconomic analysis resource. This is not a recommendation to invest in any specific security. Please make investment decisions at your own responsibility and consult professionals as needed.