1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 85
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
JAPAN
Derek Holt Vice
President, Scotiabank
Economics
Walid Khalid
Director, Investment
Strategy
Philippe Cazabon Kauak
Senior Manager,
Investment Strategy
Latest
2025f
2026f
2027f
GDP Growth
-2.3%
1.1%
0.8%
0.8%
Inflation
2.9%
3.0%
1.8%
2.0%
Unemployment
2.4%
2.5%
2.5%
2.4%
Budget Bal.
-1.4%
-2.8%
-3.2%
-2.8%
Latest
2025
1-yr fwd
2-yr fwd
3-mo yield
0.6%
0.6%
1.4%
1.4%
10-yr yield
2.1%
2.1%
2.3%
2.5%
Yield curve slope
1.4%
1.4%
0.9%
1.2%
Source: Bloomberg Finance LP, Scotiabank Economics, Scotia Wealth Management. "Latest" values are as at December 31, 2025 and, for data other than bond
yields, pertain to the most recent monthly, quarterly, or annual reading available on this date. GDP and inflation forecasts are based on Scotiabank Economics
forecasts dated December 11, 2025. Remaining forecasts are based on median consensus estimate compiled by Bloomberg | 2025 inflation and unemployment
are based on the average YoY rates for each month of the year. | 2025 yields are as at December 31, 2025. Forward periods are relative to December 31, 2025 and
are based on forward market pricing.
Key conclusions
•
Economic growth lost momentum in 3Q25 but is expected to bounce back as forwardlooking indicators, including business confidence surveys, show improvements and tariffrelated uncertainty diminishes.
•
Inflation remains above target, eroding the recent string of strong wage gains.
Government subsidies aimed at reducing costs may help sustain consumption in 2026.
•
Monetary policy tightening remains underway with the BoJ having raised its policy rate
twice in 2025. We expect further tightening in 2026 alongside ongoing balance sheet
normalization.
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