Japan’s economy grew 0.6% year-on-year in the first quarter of 2026, translating to an annualized rate of 2.1%. That beat expectations and nudged the country closer to its longest sustained expansion since World War II.
Japanese households are still dealing with stagnant real wages and the compounding pressure of an aging population. Growth is happening, but not everyone is feeling it at the kitchen table.
The macro picture looks better than it has in years
Goldman Sachs projects Japan’s full-year 2026 GDP expansion at roughly 0.7% to 0.8%. Over the past five years, Japan averaged about 0.4% real growth. The government’s stated ambition is to sustain real growth above 1% and nominal growth exceeding 3% as soon as possible.
Strong domestic demand and supportive fiscal policy are doing the heavy lifting. Corporate fundamentals have been solid enough to push the Nikkei to new highs.
