Japan’s economic growth reached an annual rate of 1.1% in the April-June quarter, according to government data. The real GDP, which measures the total value of goods and services, grew at a seasonally adjusted rate of 0.3% from the first to the second quarter of 2026.

The annualized rate for January-March was 2.1%. Despite this, private consumption dipped by 1.2% during the April-June period, while exports rose by 0.5%. Japanese exports were fueled by global demand for automobiles and semiconductors. Notable companies driving this demand include Toyota Motor Corp. and Honda Motor Co.

Government consumption increased by 1.6%. Quarterly GDP growth fell short of analysts’ expectations. Factors like the Iran war have disrupted Japan’s economy, inflating energy costs. This is particularly challenging for Japan, which relies heavily on oil imports.

The war has obstructed the Strait of Hormuz, a crucial route for oil exports from the Persian Gulf to Asia, causing price surges. Japan released some oil reserves and is seeking alternative routes. Brent crude oil prices recently stood at around $88 per barrel, higher than the previous year’s $65 but below this year’s peak of over $110.

The yen’s weakness has benefited major exporters like Toyota by enhancing the value of overseas earnings in yen. Nevertheless, a weaker yen inflates raw material import costs, increasing consumer prices and impacting spending.

Concern over rising prices exists as wage growth remains sluggish. Prime Minister Sanae Takaichi has pledged economic revitalization, yet her public support ratings are gradually declining.

The U.S. dollar recently traded at approximately 160 yen, up from about 145 yen a year prior, hitting 159 yen after the latest economic figures were shared. The Bank of Japan lifted its economic growth forecast to 0.6% for the fiscal year ending March, from a previous 0.5%.