Japan Stronger Than Expected GDP Supports June BOJ Rate Hike

Japan's economy expanded 0.5% QoQ in 1Q26, beating expectations and providing the Bank of Japan with the necessary justification to proceed with a 25bp rate hike in June.

Key Takeaways

• 1.Japan's 1Q26 GDP grew by 0.5% QoQ, exceeding the market consensus of 0.4%, demonstrating economic resilience.
• 2.ING maintains a forecast for a 25 basis point rate hike by the Bank of Japan in June 2026, with a total of 50 bps in hikes expected for the year.
• 3.Recent Japanese Government Bond (JGB) sell-offs are driven by domestic fiscal concerns, including a potential 5-10 trillion JPY supplementary budget for energy subsidies.

Table of Contents

• GDP growth beat the market consensus in first quarter
• GDP rose more than expected in 1Q26, before the full war impact hurts growth
• JGB sell-off indicates a range of challenges facing economy
• Fiscal spending will continue adding to pressures on JGBs
• Bank of Japan watch
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