Japan Q2 GDP Falls for 3rd Straight Quarter
By wchung | 04 Jul, 2026

Japan’s economy shrank at an annualized real rate of 1.3 percent in the April-June quarter due to an export slump resulting from the March earthquake and tsunami, the government reported Monday. It was the nation’s third consecutive quarter of contraction.

From the previous quarter Japan’s GDP slipped 0.3 percent, according to preliminary data from the Cabinet. The figures beat the average forecasts of an annualized GDP drop of 2.6 percent and a 0.7 percent quarterly contraction in a Kyodo News survey.

The decline in private consumption improved somewhat, slipping only 0.1 percent after a 0.6 percent drop the previous quarter as consumer sentiment recovered from the March 11 quake. Consumer spending makes up about 60 percent of Japan’s GDP.

The 4.9 percent drop in exports is the sharpest in over two years. The slump is attributed to the yen’s recent strength combined with a slowdown overseas and a crimp in domestic industrial output caused by disruptions to the supply chain caused by the earthquake and tsunami.

Domestic demand boosted real, inflation-adjusted, GDP 0.4 percent. That was offset by a 0.8 percent drop in overseas demand.

Corporate capital spending grew 0.2 percent and public investments increased 3.0 percent.

On a nominal basis, without adjusting for price changes, GDP fell an annualized 5.7 percent in the April-June quarter. That corresponds to a 1.4 percent contraction from the previous quarter. Further signs of Japan’s persistent deflation is a 1.1 percent drop in the GDP deflator, which provides a broader gauge of inflation than the consumer price index.