Japan's government has revised upward its economic forecast for the fiscal year ending next March, projecting acceleration in growth the following year due to a massive stimulus package boosting consumption and capital expenditure. The latest projections, approved by the cabinet on Wednesday, expect 1.1% expansion in the current fiscal year. Growth is forecasted at 1.3% for fiscal 2026.
Japan's government approved revised economic projections on Wednesday, December 25, marking the first such forecasts under Prime Minister Sanae Takaichi's administration. The outlook for the current fiscal year, ending March 2026, has been raised to 1.1% growth from the 0.7% estimated in August, attributed to a smaller-than-expected impact from U.S. tariffs.
For fiscal 2026, growth is projected to accelerate to 1.3%, driven by robust consumption and capital expenditure that will offset weak overseas demand. Consumption is expected to rise 1.3%, matching the pace for the current year, supported by tax breaks and easing inflation. Capital expenditure is forecasted to increase 2.8%, up from an estimated 1.9% this year, aided by subsidies and tax incentives for investments in crisis management and growth sectors like infrastructure, artificial intelligence, and semiconductor chips.
The administration's 21.3 trillion yen ($136.7 billion) stimulus package, announced in November, includes payouts to families with children and subsidies to reduce utility bills, aimed at cushioning households from rising living costs while promoting key investments. These estimates will inform the drafting of next fiscal year's state budget, set for finalization on Friday. The expansionary fiscal approach has raised market concerns over debt supply, pushing up government bond yields.
