Doha, Qatar: QNB ruled out that the new economic stimulus package will create a major change in Japan’s economic growth trends, expecting growth to slow to 0.6% annually during 2026-2027, compared to the 1.1% growth forecast for this year.
In its weekly report, the bank noted that Japan has entered a new phase of economic policy following Sanae Takaichi’s assumption of leadership as Prime Minister, the first woman to ever hold the position.
It pointed out that Takaichi has pledged to revive Japan’s economic growth by adopting what she called a responsible, proactive fiscal policy.
The report said that this policy aims to strike a delicate balance between allocating spending to strategic sectors and maintaining financial sustainability, while controlling Japan’s very large public debt.
In this context, the bank said that boosting growth in Japan is a difficult task for a country facing significant structural challenges and uncertain global outlooks.
The analysis in the report was based on several key factors, including the fact that a slowdown in consumption places a major burden on growth, given that household consumption accounts for about 60% of the Japanese economy, and is therefore a decisive factor in its performance.
QNB pointed out that, although consumption has improved this year compared to 2024, it has recently shown signs of stagnation.
It attributed weak consumption to the erosion of households’ purchasing power due to high inflation rates. Real wages adjusted for prices have contracted throughout this year after several months of gains at the end of last year, a trend expected to continue.
The report added that the Bank of Japan has continued normalizing its monetary policy, raising the benchmark interest rate to 0.5% from a deeply negative 0.1%, which has increased borrowing costs for households and reduced the space available for fiscal policy due to higher debt servicing costs.
The bank said that these negative factors could be obstacles to Japan’s economic growth, given the important role of consumption.
Regarding the second factor underlying the analysis, it noted a decline in external support for exports, weakening Japan’s major growth engine, which is heavily reliant on global integration.
In this context, the report referred to the trade agreement concluded between Japan and the United States last July, which imposed a standard tariff of 15% on most Japanese imports to the US, compared to an average tariff of 1.5% last year, placing an additional burden on the economy.
Furthermore, the bank argued that the anticipated slowdown in global trade, amid uncertainty surrounding trade policies and ongoing geopolitical tensions, adds to pessimism about the Japanese economy. Exports account for about 20% of GDP and are a key driver of industrial production, making weak export prospects a major obstacle to economic performance.
In conclusion, the report said that, given these challenges, the new government will seek drastic measures to boost growth. Within weeks of taking office, Takaichi unveiled plans to launch a fiscal stimulus package worth 21.3 trillion yen (about $135 billion), the first major economic initiative of her administration.
