| Consensus | Consensus Range | Actual | Previous | |
| Quarter over Quarter | 0.5% | 0.1% to 0.8% | 0.5% | 0.3% |
| Annual Rate | 1.7% | 0.4% to 3.3% | 2.1% | 1.3% |
| Year over Year | 0.8% | 0.5% to 1.1% | 0.6% | 0.4% |
Highlights
Japan's real gross domestic product showed a steady recovery in the January-March quarter, driven by rebounds in net exports and public works as well as resilient private consumption and a modest gain in capital spending.
Details:
Japan Q1 real GDP +0.5% q/q; median economist forecast +0.5% (range +0.1% to +0.8%)
Japan Q1 real GDP +2.1% annualized; median forecast +1.7% (range +0.4% to +3.3%)
Japan real Q1 GDP +0.6% y/y (Q4 revised +0.2%); median forecast +0.8% (range +0.5% to +1.1%)
Japan Q1 real GDP shows steady recovery from Q3 contraction, led by rebounds in net exports, public works, resilient consumption, modest capex gain
Japan Q1 GDP domestic demand contribution +0.2 pct point (Q4 revised +0.2 point); median forecast +0.3 point
Japan Q1 GDP net exports contribution +0.3 pct point (Q4 revised to +0.0 point from -0.0 point); median forecast +0.2 pct point
Japan Q1 GDP private consumption +0.3% q/q vs. median forecast +0.2%; +0.1 point contribution
Japan Q1 GDP business investment +0.3% q/q vs. median forecast +0.3%; +0.1 point contribution
Japan Q1 GDP private inventory contribution -0.1 point (Q4 revised to -0.4) vs. median forecast +0.0 point
Japan Q1 public investment +1.4% q/q (Q4 revised to -0.2%) vs. median forecast -0.5%; -0.1 point contribution
Japan Q4 real GDP revised to +0.2% q/q from +0.3%
Japan Q4 real GDP revised to +0.8% annualized from +1.3%
Japan Q1 GDP unadjusted deflator +3.4% y/y vs. +3.4% in Q4
Japan Q1 GDP adjusted deflator +0.3% q/q vs. +0.7% in Q4
Cabinet Office: Japan GDP must grow real 0.38% q/q, or annualized 1.6% in each quarter of fiscal 2026 (to March 2027) to hit +1.3% official forecast
Japan Q1 GDP: employee compensation in real terms +0.2% q/q vs. +0.5% in Q4, +1.3% y/y vs. +0.5% in Q4
Japan Q1 GDP data shows real wage growth still stagnant, limiting household spending power amid elevated food, energy price levels
Market Consensus Before Announcement
Japan’s real gross domestic product is projected to post a second consecutive quarter of growth in January-March, supported by firmer exports despite ongoing U.S. tariffs, while solid public investment, modest gains in private consumption and steady capital expenditure likely also contributed to growth.
The economy is expected to expand in the three months through March, with consumer spending continuing to improve following the government’s abolition of the provisional gasoline tax rate and fading base effects from food prices, developments that helped lift real wages.
Still, the overall pace of growth likely remained modest as consumer sentiment deteriorated amid escalating geopolitical tensions in the Middle East following the U.S.-Israeli attacks on Iran in February.
Preliminary first-quarter GDP data due from the Cabinet Office at 8:50 a.m. JST on Tuesday, May 19 (2350 GMT Monday, May 18), is forecast to show the economy expanded 0.5 percent from the previous quarter, or an annualized 1.7 percent, after rising 0.3 percent, or an annualized 1.3 percent, in October-December, marking a second straight quarter of growth.
Robust Public Works, Steady Consumption
Public investment is forecast to rise 1.4 percent from the previous quarter after falling 0.5 percent in October-December, marking the first increase in three quarters and suggesting a strong pick-up in public works spending.
Private consumption, which accounts for about 55 percent of domestic output, is expected to extend its growth streak to eight consecutive quarters in January-March, rising 0.2 percent after a 0.3 percent increase in October-December. Inflation slowed during the quarter, partly because of easing food price gains and the government’s expanded electricity and gas subsidies, helping real wages return to positive territory. The resulting improvement in purchasing power likely supported consumer spending.
In January-March, real average household spending among households with two or more people rebounded 0.7 percent on the quarter in the consumption trend index (CTI) after plunging 3.2 percent in October-December and rising 1.3 percent previously. The CTI slipped 1.3 percent on the month in March after rising 0.9 percent in February and 0.3 percent in January, suggesting private consumption likely remained sluggish but resilient in the preliminary first-quarter GDP data.
Exports Rise Despite U.S. Tariffs, Capex Firms
Exports improved despite the continued impact of U.S. tariffs on Japan’s auto-related industries, while deteriorating diplomatic relations between Tokyo and Beijing appeared to weigh on inbound tourism from China. Ministry of Finance data showed exports to the United States recovered during the quarter, while shipments to other Asian economies and Europe also remained firm. Overall, exports appeared to strengthen modestly on trend.
Supporting growth further, Ministry of Economy, Trade and Industry data showed capital goods shipments excluding transport equipment rose a solid 1.8 percent on the quarter in January-March after rebounding 1.6 percent in October-December following a 1.2 percent decline in July-September, suggesting capital expenditure remained firm in the first-quarter GDP data.
Capital investment is projected to rise 0.3 percent on the quarter following a 1.3 percent increase in October-December. Strong corporate profits, along with digitalization, labor-saving investment, research and development spending, and investment related to artificial intelligence continued to support business spending, suggesting capital expenditure maintained a moderate upward trend overall.
Consensus forecasts for key components are quarter-over-quarter percentage changes except for domestic demand, private inventories and net exports, which are measured by their contribution to GDP growth in percentage points. Figures for the previous quarter are shown in parentheses.
GDP q/q: +0.5% (+0.3%); 2nd straight rise
GDP annualized: +1.7% (+1.3%); 2nd straight rise
GDP y/y: +0.8% (+0.4%); 7th straight rise
Domestic demand: +0.3 point (+0.3 point); 2nd straight rise
Private consumption: +0.2% (+0.3%); 8th straight rise
Business investment: +0.3% (+1.3%); 2nd straight rise
Public investment: +1.4% (-0.5%); 1st rise in 3 qtrs
Private inventories: +0.0 point (-0.3 point); flat after 2nd straight drop
Net exports (external demand): 0.2 point (-0.0 point), 1st rise after flat
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.