Japan's Economic Growth Expected to Stall Amid Global Tensions

Japan's economy, which had been building solid growth momentum prior to the Iran war, is expected to see GDP growth stagnate in the current and next quarters, according to economists at Capital Economics. Marcel Thieliant, an economist at the firm, noted that first-quarter data showed quarter-on-quarter growth in both household spending and business investment. A significant increase in exports, which outpaced a smaller rise in imports, also contributed to economic growth. However, despite market discussions about potentially looser fiscal policies under Japanese Prime Minister Sanae Takaichi, government consumption has slowed quarter-on-quarter, highlighting that the supplementary budget announced last November has not had a substantial impact on government spending. Meanwhile, consumer confidence has significantly declined, and measures to cap fuel prices are only temporarily suppressing inflation. Thieliant added that even if the Japanese government drafts a new supplementary budget to fund gasoline subsidies, it would at best stabilize consumer spending.