Japan's Economy Slows Amid Weakening Demand and Rising Inflation

Japan's economy grew at a slower pace than expected in Q2 2026, with a 1.1% expansion, missing the market forecast of 2.0%. The weak consumer spending and business investment weighed on growth.

The slowdown comes as inflationary pressures and a weaker yen are fueling expectations that the Bank of Japan could raise rates as soon as September. This would be a significant move, given the central bank's history of keeping interest rates low.