Japan Cuts Growth Forecast Amid Middle East Oil Price Pressure

Japan's government has downgraded its economic growth forecast for fiscal 2026 to 0.9% from 1.3%, citing higher global oil prices driven by rising tensions in the Middle East as a major factor.

The Cabinet Office made this decision, stating that crude price increases will restrict domestic demand, although wage gains and government policy support would partially mitigate the impact.

The forecast revisions include lower projections for private consumption growth to 0.9% from 1.3% and reduced capital investment growth to 2.3% from 2.8%.

The Bank of Japan, however, takes a more optimistic view, with Bloomberg reporting that it is set to discuss raising its fiscal 2026 growth forecast from the current 0.5%, citing solid exports and global demand linked to artificial intelligence.