Japan
“The Japanese economy is expected to maintain moderate growth in 2026,” notes Deutsche Bank Research Chief Economist for Japan, Kentaro Koyama. He explains that while the impact of US tariff policy on Japan is anticipated to be limited, “rising wages and decelerating inflation are likely to support household consumption”.
Headline inflation is projected to fluctuate significantly due to upcoming government measures to curb price increases, but core-core inflation is forecast to slow to around 2% by mid-2026. Fiscal policy faces increasing risks of expansion, and monetary policy exhibits a stronger bias towards continued easing. Future risks include a weaker yen, a fiscal risk premium, and geopolitical uncertainties.
“Chinese leaders have become more confident in the country’s technological capabilities and economic resilience”
Yi Xiong, Chief Economist, China, Deutsche Bank Research
China
According to Deutsche Bank Research Chief Economist for China Yi Xiong, China’s economic growth is projected to slow to 4.5% in 2026 due to “anti-involution” policies and diminishing returns from consumer stimulus, though inflation is expected to improve with consumer price inflation reaching 1.5% and producer price inflation) turning positive in H2 2026.
His takeaway from the 15th Five-Year Plan, which set policy priorities for 2026–30, is that Chinese leaders have become more confident in the country’s technological capabilities and economic resilience, despite observing a more challenging external environment for the coming years.
He notes three new priorities that stand out:
Accelerating technological application/commercialisation by industries;
Strengthening economic ties with the outside world; and
Improving people’s wellbeing through increased public spending.
“We think these policies will benefit innovative private firms in emerging industries and boost domestic consumption, especially in the services sector.” Monetary policy, he adds, “will remain stable with continued fiscal expansion”. Robust external demand – driven by strong exports, easing US-China tensions, and accelerated RMB internationalisation – is also anticipated.
Figure 3: China’s GDP growth is projected at 4.5% in 2026
Source: Deutsche Bank
India
While India’s growth momentum has held up better than expected in 2025, despite the tariff and other geopolitical risks, it is not as strong as what is reflected by the headline GDP growth trend, notes Deutsche Bank Research’s India Chief Economist, Kaushik Das. Real GDP growth looks set to moderate to 6.4% year-on-year (yoy) in 2026, from what is looking like a 7.3% outturn in 2025 – and then rise back to 6.7% yoy in 2027. CPI inflation – while heading for a 2.2% outturn in 2025 is forecast to rise to 3.9% yoy in 2026 and a further 4.4% yoy in 2027.
Given this growth-inflation mix, the team expect one more 25bps rate cut from the Reserve Bank of India (RBI) in this cycle, with an extended pause thereafter through 2026. Das explains, “If growth momentum slips sharply, then the RBI could consider cutting rates by another 25bps in 2026. We expect the RBI to start rate hikes from Q2 2027, taking the repo rate back to 6.25% by H1 2028. We forecast the fiscal deficit to stabilise around 4.5% of GDP for the full years of 2027 and 2028 at the central government level and around 7.5% of GDP on a consolidated basis.”
While a favourable trade deal may result in some appreciation of the rupee in the near term, the team expects the rupee to maintain a depreciating bias, likely ending 2026 at 90 vs. the USD and then depreciating further to 92 by the end of 2027. But overall, they expect the underlying momentum to improve over the next few years, “aided by a supportive US-India bilateral tariff deal (which should see US tariff coming down below 20%, from 50% currently) and lagged favourable impact of generous fiscal and monetary support announced in 2025.