Japan’s economy slows, missing growth forecasts

What the report says

Japan’s economy expanded more slowly than expected in the April-June quarter, according to figures published by the country’s Cabinet Office and reported by Al Jazeera on August 17, 2026. Gross domestic product rose 0.3 percent from the previous quarter, marking a third straight quarter of growth, but falling short of analysts’ 0.5 percent forecast. On an annualised basis, output grew 1.1 percent.

The slowdown was linked to weak household spending and lower business investment. Al Jazeera reported that private consumption was flat in real terms, while capital expenditure declined 1.2 percent quarter on quarter. Strong exports helped offset some of that weakness, with net trade adding to growth while domestic demand subtracted from it.

The report said the softer performance could complicate the Bank of Japan’s next interest-rate decision in September as policymakers continue to move away from years of ultra-low borrowing costs. Japan raised its benchmark rate to 1 percent in June, the highest level in more than three decades, after beginning to unwind its long-running easy-money stance in 2024.

Al Jazeera also cited economists who expect growth to remain subdued later in 2026, pointing to high energy costs, a weak yen and uneven global demand. As a general point of background, Japan remains heavily exposed to imported energy prices because it relies on overseas supplies for most of its crude oil needs.