Japan Cuts Fiscal 2026 Growth Forecast to 0.9% on Oil and Weaker Yen

Japan slashed its growth forecast for the current fiscal year to 0.9% on Thursday, blaming surging crude oil prices and a weaker yen for squeezing the import-dependent economy.

The downgrade exposes how quickly Middle East tensions can reshape the outlook for an advanced economy.

The Oil and Currency Assumptions Behind the Downgrade

Fiscal year 2026 in Japan runs from April 2026 through March 2027, the standard period governments use for budgeting and forecasting. The Cabinet Office presented the revision alongside updated fiscal projections.

The new figure marks a sharp cut from January. Officials had projected 1.3% growth just six months ago, before global energy markets turned against the country.

Two assumptions drive the revision. The government now models crude oil at $92.5 per barrel, well above its earlier estimate of $68.

Currency expectations shifted just as dramatically. Officials assume the yen is trading at 161.4 per dollar, compared with 155.2 in the previous forecast.

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