Japan's economy accelerates in Q1 with 2.1% annualized growth, beating forecasts. GDP expanded 0.5% quarter-on-quarter, surpassing the 0.4% estimate, driven by robust consumption and strong exports. Semiconductor equipment shipments surged 29.3% year-on-year, while overall exports grew 11.5%. However, economists warn headwinds ahead as the Iran war pushes energy costs higher. The Bank of Japan cut its fiscal 2026 growth forecast to 0.5% from 1% and raised core inflation outlook to 2.8%, signaling concerns about sustained economic momentum. Rising crude oil prices threaten corporate profits and household incomes, prompting Tokyo to consider additional fiscal stimulus to offset Middle East crisis impacts.
