Japan Macro Weekly

Japan's economy showed resilience in early 2026 with 2.1% annualized GDP growth, prompting Mizuho to forecast a BOJ rate hike to 1.0% in June. However, prolonged Middle East tensions and high oil prices remain significant downside risks to both growth and the yen's stability.

Key Takeaways

• 1.Japan's 1Q 2026 GDP grew at 2.1% annualized, beating expectations due to firm private consumption and external demand.
• 2.Mizuho forecasts the Bank of Japan will hike the policy rate to 1.0% at the June meeting as part of a normalization path toward a 1.5% terminal rate.
• 3.Geopolitical conflict in the Middle East poses a risk of stagflation if oil prices remain above USD100/bbl and the Strait of Hormuz remains closed.

Table of Contents

• Review of key indicators and events
• Economic indicators
• BOJ-related events
• Economic outlook (as of 25 May)
• Comments on real GDP outlook
• Comments on CPI outlook
• Comments on domestic rates outlook
• Important Disclosure Information
• Analyst Certification
• Disclaimer

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