Japan Revises Economic Forecast, Projects Growth Improvement in 2026

Fiscal Stimulus to Drive Economic Recovery

Japan's government has revised its economic projections, forecasting 1.1% growth for the current fiscal year ending March 2025, up from the previous estimate of 0.7% made in August. The improvement is attributed to the lesser-than-expected impact of US tariffs. More significantly, the government is projecting stronger growth in 2026, driven by a substantial fiscal stimulus package announced by Prime Minister Sanae Takaichi.

Policy Objectives and Economic Implications

The stimulus package is designed with dual objectives: to mitigate the impact of rising living costs on households and to encourage investment in growth areas. By boosting consumption and capital spending, the government aims to create a more robust economic recovery. This proactive fiscal policy is expected to be a key driver of Japan's economic performance in the coming year.