Japan Slashes Growth Outlook Amid Higher Oil Prices

The Japanese government has revised its economic growth outlook for FY2026 to 0.9%, down from an earlier estimate of 1.3%. This downgrade is attributed to higher crude oil prices, which are expected to reach $92.5 per barrel.

Resource-poor Japan is particularly vulnerable to rises in oil prices, and the weaker yen against the dollar also contributes to raising import costs. The government expects the yen to trade at 161.4 against the U.S. dollar, much weaker than its previous projection of 155.2.

The Cabinet Office's forecast for FY2027 is more optimistic, with GDP expected to expand by 1.1%. This growth is driven by Prime Minister Sanae Takaichi's push for boosting investments in crisis management and strategic growth sectors.