Japan lowers economic growth forecast for the current fiscal year to 0.9%, as energy costs squeeze consumption and investment

(1) The Japanese Cabinet Office has lowered its real GDP growth forecast for fiscal year 2026 (ending March 2027) from 1.3% in January to 0.9%, mainly due to heightened oil prices caused by the Middle East situation, which puts pressure on household spending and corporate profits. The expected growth rate for private consumption in fiscal year 2026 has been lowered from 1.3% to 0.9%, and capital expenditures from 2.8% to 2.3%. (2) Despite a weaker outlook for the current fiscal year, the government expects economic growth to accelerate to 1.1% in fiscal year 2027, supported by strong capital expenditures and private consumption. (3) Due to rising energy costs, the consumer inflation forecast for fiscal year 2026 has been raised from 1.9% to 2.2%. The government expects nominal wage growth of 3.1% in fiscal year 2027, which should maintain positive real wage growth, and also anticipates that the basic fiscal balance will return to a surplus of 1.4 trillion yen (about $8.6 billion). However, Japanese government debt still remains the highest among developed economies.