Japan Cuts Growth Forecast as Higher Oil Prices Bite

Japan's government has 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 GDP growth of 0.9 per cent for the fiscal year ending March 2027, down from a 1.3 per cent expansion previously forecast.

The weaker outlook highlights the strain rising energy costs are placing on Japan's economy, which is heavily dependent on imported fuel. Private consumption is now expected to rise 0.9 per cent in fiscal 2026, less than the 1.3 per cent increase previously projected.

The government forecast nominal wages to rise 3.1 per cent annually through fiscal 2027, keeping real wage growth positive despite persistent inflation. The primary budget balance is projected to return to a 1.4 trillion yen (US$8.6 billion) surplus in fiscal 2027.