| Consensus | Consensus Range | Actual | Previous | |
| Quarter over Quarter | 0.3% | 0.2% to 0.5% | 0.5% | 0.5% |
| Annual Rate | 1.3% | 1.0% to 2.0% | 1.8% | 2.1% |
| Year over Year | 0.3% | 0.2% to 0.6% | 0.4% | 0.6% |
Highlights
Japan's GDP growth in the January-March quarter was little changed in the second reading, coming in firmer than expected, as the downward revision to business investment in equipment and software was milder than forecast and its dampening effect was partly offset by an upward revision to consumer spending.
The gross domestic product grew 0.5% on quarter, or an annualized rate of 1.5%, compared to the initial reading of a 0.5% gain, or 2.1% annualized. Many economists had projected a sharper downward revision. The Q1 growth follows a modest 0.2% rise (a revised 0.7% annualized) in the final quarter of 2025 and a 0.6% drop (a revised 2.3% annual) in July-September, which was the economy's first contraction in six quarters.
Capex posted its first drop in two quarters, down 0.7% on quarter, instead of a second straight gain (+0.3%) estimated in the initial reading based on supply side data, but the decline was less steep than the median forecast of a 1.0% slump. The downward revision is based on demand side results in the Ministry of Finance's quarterly business survey released last week that showed capex slipped a seasonally adjusted 2.0% on quarter after rebounding 3.0% in Q4. Some firms appeared to have delayed capex plans amid uncertainty over the impact of the Middle East conflict on growth and inflation.
Looking ahead, some economists expect the economy to shrink slightly in the April-June quarter (data due Aug. 17) as the Iran war that broke out in late February has already triggered a spike in energy prices and caused shortages of petrochemical products and building materials. Factory production is constrained, construction is being delayed and retailers are being forced to raise prices.
The effects of weaker business investment didn't trim the contribution of domestic demand, which added 0.2 percentage point to total domestic output, instead of a smaller 0.1 point predicted by economists. The contribution of external demand, as measured by net exports (exports minus imports), was unrevised from a positive 0.3 point in the preliminary data.
Private consumption, which accounts for about 55% of the GDP, remains sluggishly resilient amid elevated costs for daily necessities and falling real wages for many employees. Its quarterly gain was unrevised at 0.3%, which is a fifth consecutive increase, but its contribution to overall growth was revised up slightly to 0.2 point from 0.1 point. On-and-off subsidies for utilities and fuels have provided some support to consumers while nominal base wages have been on a modest uptrend.
Details:
Japan Q1 revised real GDP: +0.5% q/q vs. prelim +0.5%; median economist forecast +0.3%
Japan Q1 revised real GDP: +1.8% annualized vs. prelim +2.1%; median forecast +1.3%
Japan Q1 revised real GDP: +0.4% y/y vs. prelim +0.6%; median forecast +0.3%
Japan Q1 GDP 2nd reading little changed as impact of drop in capex partly offset by upward revision to private consumption contribution
Japan Q1 GDP revised data: capex posts 1st drop in 2 quarters after demand-side data added vs. initial 2nd straight rise based on supply side
Cabinet Office: Japan GDP must grow real 0.40% q/q, or annualized 1.6% in each quarter of fiscal 2026 (to March 2027) to hit +1.3% official forecast
Japan Q1 revised GDP: domestic demand contribution +0.2 pct point vs. prelim +0.2 point; median forecast +0.1 point
Japan Q1 revised GDP: capex contribution -0.1 pct point vs. prelim +0.1 point
Japan Q1 revised GDP: private consumption contribution +0.2 pct point vs. prelim +0.1 point
Japan Q1 revised GDP: private inventories contribution -0.1 pct point vs. prelim -0.1 point; median forecast -0.1 point
Japan Q1 revised GDP: public investment contribution +0.1 pct point vs. prelim +0.1 point
Japan Q1 revised GDP: net export contribution +0.3 pct point vs. prelim +0.3 point; median forecast +0.3 point
Market Consensus Before Announcement
Japan’s revised gross domestic product for the January-March quarter is expected to be revised downward from the preliminary reading, mainly dragged down by weaker corporate capital expenditure. Still, this is unlikely to alter the underlying resilience of the economy, which kept quarter-on-quarter GDP growth in positive territory for a second consecutive quarter, led by private consumption, public investment and exports in the first quarter.
The growth was also supported by generally firm exports despite stiff U.S. tariffs and deteriorating diplomatic relations between Japan and China. Still, the growth outlook remains uncertain as geopolitical tensions in the Middle East amid military conflicts involving the U.S., Israel and Iran continue to drive up oil prices and other natural resource costs, while U.S. tariff measures and diplomatic tensions between China and the U.S. show little sign of easing quickly.
Consensus forecasts are shown as quarter-on-quarter percentage changes, except for domestic demand, private inventories and net exports, which are expressed in percentage-point contributions. Preliminary figures are in parentheses.
GDP q/q: +0.3% (+0.5%); 2nd straight rise
GDP annualized: +1.3% (+2.1%); 2nd straight rise
GDP y/y: +0.3% (+0.6%); 7th straight rise
Domestic demand: +0.1 point (+0.2 point); 2nd straight rise
Private consumption: +0.3% (+0.3%); 5th straight rise
Business investment: -1.0% (+0.3%); 1st drop in 2 qtrs
Public investment: +1.4% (+1.4%); 1st rise in 3 qtrs
Private inventories: -0.1 point (-0.1 point); 4th straight drop
Net exports (external demand): +0.3 point (+0.3 point), 2nd straight rise
Definition
Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.
Description
Gross domestic product is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios.
The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.