Japan cut its growth forecast for this fiscal year to 0.9 percent, and lifted the oil price it assumes from $68.0 a barrel to $92.5

$92.5 a barrel.

That is the crude oil price the Japanese government now assumes for the whole of the fiscal year, and it is the single change that carries most of what follows. In January the Cabinet approved a forecast built on $68.0. The Cabinet Office published the revision on Thursday morning in Tokyo.

Real GDP growth for fiscal 2026 comes down to 0.9 percent from 1.3 percent. Nominal growth goes to 3.0 percent from 3.4 percent. Private consumption is cut to 0.9 percent from 1.3 percent, business capital investment to 2.3 percent from 2.8 percent, private residential investment to minus 0.2 percent from 1.3 percent, and public fixed capital formation to minus 0.9 percent from 1.3 percent. Exports are the one line revised up, to 2.3 percent from 2.0 percent, and because imports were cut harder the contribution of external demand flips from minus 0.2 to plus 0.1.

The projection is still above the private sector. The document prints the ESP Forecast survey of July 15, whose average is 0.7 percent for the same year.

The largest revision is not GDP

Domestic corporate goods prices, the measure of what companies in Japan charge each other, are forecast at 7.0 percent. In January the same line read 1.4 percent. Nothing else in the table moves by anything close to that.

Consumer prices are forecast at 2.2 percent, up from 1.9 percent, and the unemployment rate at 2.6 percent, up from 2.4 percent. So the revision is a downgrade to output and an upgrade to prices, taken together, and the document says the reason is the price of oil.

Real gross national income falls furthest of the aggregate measures, to 0.6 percent from 1.7 percent.

The assumptions underneath

Three external inputs changed. Crude oil is $92.5 a barrel against $68.0. The yen is 161.4 to the dollar against 155.2. World growth is 2.7 percent against 2.8 percent.

The Cabinet Office states its method for the first two. Both are the average of the daily readings from June 17 to July 16, 2026, held constant from the following day onward. The oil figure is a weighted average of Dubai and West Texas Intermediate import prices. It is an assumption, not a forecast, and the document is explicit about that.

One footnote is worth pulling out. The contribution of public demand in this projection includes about minus 0.1 percentage point from a change in public inventories caused by releasing crude from the national reserve. The government has written a reserve drawdown into the arithmetic of its own forecast.

What the text says

The opening paragraph states that the Japanese economy is recovering moderately and that the effect of the Middle East situation needs to be watched. It commits the government to executing the fiscal 2026 supplementary budget flexibly, to securing stable crude supply through alternative procurement and, where necessary, releases from the reserve, and to keeping important goods flowing.

The closing paragraph repeats the caution and adds two more, on overseas economic uncertainty and on movements in financial and capital markets.

For fiscal 2027 the document gives a reference projection of 1.1 percent real growth, 3.9 percent nominal growth and 2.1 percent inflation. A footnote records that this assumes an additional 10 trillion yen of spending beyond the separately managed budget, and that the actual government forecast for that year will not be settled until the end of this one.

Both documents are published in Japanese only, which is why the detail above appears in no English-language wire copy.