The International Monetary Fund has upgraded its projection for Japan's economic growth in 2026 to 0.7%, citing the positive impact of new government spending measures.

According to the IMF's latest World Economic Outlook, the Japanese economy is now forecast to grow faster compared with the October 2025 estimate of 0.1%.

This pace, however, remains slower than the anticipated 1.1% growth for 2025.

Looking further ahead, the IMF predicts growth of 0.6% for Japan in 2027, compared with a flat or 0% growth initially forecasted.

IMF also expects a gradual increase in Bank Of Japan's interest rates while maintaining supportive government spending in the short term.

The IMF also forecasts that Japan's inflation will ease this year and align with its national target by 2027, driven by declining food and commodity prices.