Japan: Quarterly Estimates of GDP for January - March 2026 (First Preliminary Estimates)

Members commenced their deliberations by discussing the impact of the conflict in the Middle East on global financial conditions. While riskier asset prices had moved in response to the conflict and the resultant increases in oil prices, the net change since the onset of the conflict had been modest. Global equity prices had rebounded from an initial decline, supported by the announcement of a ceasefire and material upgrades to forecast earnings in some sectors, including semiconductors. Corporate bond spreads in advanced economies had retraced the rise observed immediately after the onset of the conflict and remained low relative to history. Measures of expected equity price volatility had increased somewhat but remained well below the levels recorded during earlier episodes of heightened uncertainty, including the announcement of higher US tariffs in April 2025. Members discussed the possibility that financial markets were under-pricing downside risks associated with the conflict, given the contrast between these moves and sharp declines in consumer and business confidence in many jurisdictions. They noted several possible explanations for this contrast, including: a possible expectation among market participants that the conflict would be resolved reasonably quickly; the demonstrated resilience of the global economy in preceding years to a range of significant shocks; the long-run decline in the oil intensity of global output (which is currently around half the level of the early 1990s); and ongoing optimism about the impact of the AI boom on corporate earnings in future. The impact of the conflict on inter Reserve Bank of Australia minutes indicate most members supported a strong case for raising rates, with one member favouring a pause for further information. Reserve Bank of Australia: growth in the Australian economy is expected to stay below trend for an extended period.