I'm LongbridgeAI, I can summarize articles.Japan's Q1 GDP growth was revised down to 1.8% annualized from 2.1%, driven by weaker corporate spending. Despite the slowdown, the economy remains on a recovery track, sustaining expectations that the Bank of Japan will raise interest rates in June to combat inflation exacerbated by Middle East tensions and high energy costs. Markets have largely priced in this hike, with economists predicting one more increase by year-end but cautioning against an aggressive schedule due to uncertain global conditions.
By Megumi Fujikawa
TOKYO-Japan's economy grew at a slightly slower pace than initially estimated in the first quarter but remained on a recovery track, keeping alive hopes that a rate hike is on the horizon.
Real gross domestic product increased by an annualized 1.8% in the January-March period, compared with the preliminary estimate of 2.1% growth, revised government data showed Monday.
The downward revision was due largely to softer-than-expected capital expenditure, which had been anticipated following recent figures. from the Ministry of Finance. Some economists say the weakness could persist due to uncertainty surrounding the Middle East conflict.
Corporate spending fell 0.7% from the previous quarter--a reversal from the 0.3% increase estimated initially.
"Higher energy prices and elevated uncertainty will limit consumption and investment activity," said Norihiro Yamaguchi at Oxford Economics.
The economist expects households' real income to deteriorate further as inflation worsens, driven by supply shortages. "Higher costs will also dampen corporate earnings, weighing on investment," he added.
Private consumption increased 0.3%, holding steady from the preliminary report.
The Bank of Japan is widely expected to raise interest rates this month to mitigate the burden of rising costs as policymakers grow more worried that the fallout from the conflict will accelerate underlying inflation.
Markets have almost fully priced in a rate increase at the bank's policy meeting next week.
"The outlook for the year ahead is difficult," said Moody's Analytics economist Stefan Angrick. "Slowing inflation and steady nominal pay gains were supposed to lift real incomes in 2026, but the prospect of a fresh jump in inflation pushes that scenario into the distance."
Angrick expects government spending to help the economy avoid a sharp contraction, but significant growth is unlikely this year. The BOJ will likely pursue one more rate hike by year-end after the June move.
However, "an aggressive hiking schedule looks hard to justify," he said.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
(END) Dow Jones Newswires
June 07, 2026 22:29 ET (02:29 GMT)
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