Japan’s 2026 Growth Revised Down to 0.6%, with Fiscal Support Offering Only Limited Cushion

The IMF trimmed Japan’s 2026 growth forecast by 0.1 percentage point to 0.6%, while the 2027 projection was marginally raised by 0.1 percentage point to 0.7%.

The report argues that Japan’s fiscal support measures have partly cushioned the adverse effects of weak overseas demand and the Middle East conflict. However, as a major energy importer, Japan cannot escape the impact of elevated global energy prices. The IMF expects the Bank of Japan to gradually raise its policy rate, while the government will maintain expansionary fiscal policy in the near term.

After growing 1.2% in 2025, Japan’s economy is projected to slow markedly in 2026. With global trade growth expected to ease from last year’s 5% to 3.5%, the external headwinds facing export‑oriented Japan are considerable.