Nomura Securities revised its outlook for Japan's fiscal 2026–27 economy using five layers to organize the impact of the situation in the Middle East. While maintaining its assumptions for oil prices, the consumption tax rate and the yen exchange rate, it lowered its outlook for real economic growth.
Based on the Cabinet Office's preliminary GDP report, Nomura Securities revised its outlook for Japan's fiscal 2026–27 economy. As uncertainty surrounding the situation in the Middle East increases, it organizes the potential impact using five layers as a roadmap.
The revised outlook for real GDP growth is 0.8% for fiscal 2025, 0.5% for fiscal 2026 and 1.0% for fiscal 2027. Although the fiscal 2026 forecast is below the previous estimate of 0.9%, a gradual recovery is still expected. The assumptions for crude oil prices, the dollar-yen exchange rate and the consumption tax rate remain unchanged, with fluctuations in economic activity incorporated into the outlook.
The five layers are: 1) supply constraints on the price side, 2) supply constraints on the quantity side, 3) export constraints caused by disruptions to logistics, 4) effects transmitted through overseas economies, and 5) a domestic demand shock. The outlook is built on the assumption that even if the situation in the Middle East worsens, its effects will not progress to layers 4 and 5.
Core CPI is assumed to rise 0.9% year on year in fiscal 2027. Following the revision, the central scenario for rate hikes remains June and December 2026 and June 2027. Uncertainty remains over the government's consideration of a supplementary budget and the durability of policy effects.