Item 1 of 3 Price tags of items are displayed at a vegetable shop in Tokyo, Japan, July 28, 2026. REUTERS\/Manami Yamada\u2028<\/p>\n
[1\/3]Price tags of items are displayed at a vegetable shop in Tokyo, Japan, July 28, 2026. REUTERS\/Manami Yamada Purchase Licensing Rights, opens new tab<\/a>FY2026 real GDP growth forecast cuts to 0.9% from January’s 1.3%Government sees FY2027 growth accelerating to 1.1%Primary budget balance projected to return to surplus in \u200bFY2027<\/p>\n TOKYO, July 30 (Reuters) – Japan’s government cut its economic growth forecast \u200cfor the current fiscal year on Thursday, as higher oil prices linked to Middle East tensions squeeze household spending and corporate profits.<\/p>\n In its mid-year estimates, the Cabinet Office projected inflation-adjusted \u200bgross domestic product (GDP) growth of 0.9% for the fiscal year ending \u200bMarch 2027, down from a 1.3% expansion projected in January.<\/p>\n Sign up here.<\/a><\/p>\n However, growth \u2060is forecast to accelerate to 1.1% in the following fiscal year on \u200bthe back of strong capital expenditures and private consumption, according to the Cabinet \u200bOffice.<\/p>\n The weaker outlook for this fiscal year highlights the strain rising energy costs are placing on an economy heavily dependent on imported fuel.<\/p>\n Private consumption is now expected to rise 0.9% in \u200bfiscal 2026, less than the 1.3% increase projected in January, while capital \u200bexpenditure is seen growing 2.3%, versus a previous forecast of 2.8%.<\/p>\n Consumer inflation is projected to be \u200c2.2% \u2060in fiscal 2026, above the government’s January estimate of 1.9%, reflecting the impact of higher energy costs.<\/p>\n The government forecast nominal wages to rise 3.1% annually through fiscal 2027, keeping real wage growth positive despite persistent inflation.<\/p>\n The Cabinet Office said \u200bthe primary budget \u200bbalance is projected \u2060to return to a 1.4 trillion yen ($8.6 billion) surplus in fiscal 2027, despite the government’s reduced emphasis on the primary \u200bbalance as a benchmark of fiscal discipline.<\/p>\n Except for the asset \u200bbubble period \u2060between 1986 and 1991, Japan’s primary budget balance has been in deficit for most of the postwar era, resulting in a vast debt pile more than twice \u2060the \u200bsize of the economy, the largest among developed \u200beconomies.<\/p>\n Plans to return to a budget surplus \u2014 a goal first introduced in the early 2000s \u2014 have been \u200bpushed back multiple times.<\/p>\n ($1 = 163.5800 yen)<\/p>\n Reporting by Makiko Yamazaki; Editing by Kevin Buckland<\/p>\n Our Standards: The Thomson Reuters Trust Principles., opens new tab<\/a><\/p>\n