Japan Cuts Growth Forecast Amid Rising Energy Costs

Japan's government cut its economic growth forecast for the current fiscal year due to higher oil prices and their impact on household spending and corporate profits. The Cabinet Office projected inflation-adjusted gross domestic product (GDP) growth of 0.9% for the fiscal year ending March 2027, down from a 1.3% expansion projected in January.

The weaker outlook highlights the strain rising energy costs are placing on an economy heavily dependent on imported fuel. Private consumption is expected to rise 0.9%, less than the 1.3% increase projected in January, while capital expenditure is seen growing 2.3%, versus a previous forecast of 2.8%. Consumer inflation is projected to be 2.2% in fiscal 2026.

The government's primary budget balance is projected to return to a 1.4 trillion yen ($8.6 billion) surplus in fiscal 2027, despite the reduced emphasis on the primary balance as a benchmark of fiscal discipline.