What is ING's revised GDP growth forecast for Japan in Q2 and Q3 2026, and what factors are driving the slowdown?

ING has lowered its GDP forecast for Japan to 0.2% quarter on quarter in Q2 2026 and further moderated it to 0.0% quarter on quarter in Q3. This slowdown is driven by drags from inventory adjustments and net exports, while government subsidies and firm wage growth are expected to support consumption. Prolonged energy shocks and inflation—fueled by the Middle East war and the effective closure of the Strait of Hormuz since 28 February—are weighing on economic activity, softening investment due to rising input costs and uncertainty, and dampening corporate earnings. Even if the war ends or energy supplies improve by end-Q2, oil and gas stockpiling is expected to cause an import surge that weighs on third-quarter growth.

What emergency fiscal measure is Prime Minister Sanae Takaichi considering, and how is it intended to function?

Prime Minister Sanae Takaichi is mulling an extra Budget to subsidize gasoline and fuel prices through the summer, announced on 18 May. The Budget is intended to fund emergency relief measures—not broad economic stimulus—and is therefore expected to deliver only a limited multiplier effect on growth, according to ING senior economist Min Joo Kang. Takaichi has not specified the allocated amount and had previously indicated it would not be required before the ruling coalition meeting on 18 May.

Japan's 2026 Economic Growth Expected to Moderate Amid Energy Shocks and Inflation

May 19, 2026

Japan's government plans fuel subsidies as energy shocks and Middle East tensions drive inflation, prompting the Bank of Japan to monitor impacts while ING lowers 2026 GDP forecasts.

icis

2026-05-19

Japan's 2026 Economic Growth Expected to Moderate Amid Energy Shocks and Inflation

Japan's 2026 Economic Growth Expected to Moderate Amid Energy Shocks and Inflation

FAQ