Japan's Q1 Economic Growth at 0.5%, Exceeding Expectations but Not Yet Reflecting Energy Price Pressures

(CNA Tokyo, May 19, Comprehensive Foreign Report) According to preliminary official data released today, Japan's economy grew by 0.5% in the first quarter of this year, surpassing the market expectation of 0.4%; however, this figure has not yet reflected the impact of oil prices from the war in the Middle East. Data from Japan's Cabinet Office shows that the first-quarter growth was mainly driven by an increase in private consumption and corporate investment. Japan's performance in the first quarter of this year continues the economic growth from the last quarter of 2025, which saw a 0.2% growth (revised down from a previously announced 0.3%). However, Marcel Thieliant, an analyst at Capital Economics, warned that the oil price effect from the Middle East conflict might only be reflected in future figures. Due to the impact of the war in the Middle East, prices for everything from energy to rice have soared in Japan, putting consumers under pressure. Prime Minister Sanae Takaichi plans to compile a supplementary budget to maintain economic growth. In a report, Thieliant noted: "The Japanese economy is facing the Iran war with solid momentum, but we believe Japan's economic growth will stagnate this quarter and the next." Thieliant pointed out that although the Japanese government is using subsidies to curb the rise in oil prices, the full impact of soaring energy prices is expected to be felt in the coming months. Japan relies on the Middle East for about 95% of its crude oil imports. Thieliant added that consumer confidence has already begun to decline. The Bank of Japan forecasts that consumer prices will rise by 2.8% this fiscal year, higher than the previous forecast of 1.9%; it has also raised next year's price outlook from 2.0% to 2.3%. The Bank of Japan revised its economic growth forecast for fiscal 2026 down from an original 1.0% to 0.5%, and lowered next year's forecast from 0.8% to 0.7%. The depreciation of the yen has increased Japan's import costs, and Japan relies heavily on imports for energy and food. It is believed that the Japanese government has intervened in the market with tens of billions of dollars to support the weakening yen. (Translator: Chi Chin-ling) 1150519