Japan’s economy grew 1.4% in April-June, but domestic demand remained weak

Japan’s real economy grew at an annualized rate of 1.4% in April-June 2026, its third straight quarter of growth.

The expansion was modest because household spending was nearly flat and business investment fell for a second quarter.

Labor and materials shortages continued to hinder investment projects.

Exports minus imports supported growth, in part because crude oil imports fell after the Strait of Hormuz was effectively closed.

Since lower imports raise GDP in the accounting, that drop helped the growth figure even as it showed Japan’s dependence on overseas energy.

Higher oil prices and a weaker yen are expected to push up inflation and reduce households’ purchasing power, while a recovery in imports could weigh on growth in July-September.

The commentary says Japan should focus on targeted investment, worker skills, energy and materials supply, and productivity, and expects the economy to regain momentum through fiscal 2027 as the effect of high oil prices eases.