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Japan’s GDP growth to moderate to 0.8% in 2026: IMF
Private investment and consumption are expected to remain strong, the latter supported by a gradual rise in real wages as inflation eases and labour shortages persist, the IMF said in a release after its executive board concluded the Article IV consultation with Japan recently.
Japan’s GDP growth is projected to remain strong in 2026, but to moderate to 0.8 per cent due to weaker external demand and the impact from the conflict in the Middle East, the IMF said.
Private investment and consumption are expected to remain strong.
From 1.3 per cent YoY in February, inflation is expected to rise this year before converging to the central bank’s target in 2027.
The Japanese economy has displayed impressive resilience in the face of global shocks and output is growing above potential. Domestic demand has been robust and unemployment remains low.
After three decades of near-zero inflation, prices grew faster than the BOJ’s target for over three and a half years before moderating in January.
While nominal wages are rising at a historic pace, there are persistent concerns about the cost of living as high inflation erodes household purchasing power, the IMF noted.
From 1.3 per cent year on year (YoY) in February, inflation is expected to rise this year before converging to the central bank’s target in 2027. Risks to the outlook and inflation are broadly balanced.
Recent fiscal performance has exceeded expectations, but the deficit is expected to widen in 2026 and spending on interest and health and long-term care for the aging population will continue to rise, eventually leading to an increase in the debt-to-GDP ratio from 2035.
Fiscal prudence is needed, including a plan to keep debt-to-GDP on a firmly downward path, the IMF added.
Fibre2Fashion News Desk (DS)