BNP Paribas forecasts Japan’s GDP growth to decelerate to 0.5% in 2026 amid rising inflation and production costs.
Japan’s GDP growth is expected to slow to 0.5% in 2026 from 1.1% in 2025, driven by higher inflation and production costs. The Bank of Japan is projected to continue policy normalization with a 25 basis point hike in Q2 2026.
The terminal rate is forecast to reach 2.0% as the central bank gradually tightens monetary policy. Growth deceleration reflects broader economic pressures, including sustained cost increases for businesses and consumers.
Markets are monitoring the BoJ’s pace of rate hikes amid concerns over economic resilience and inflation persistence.