Corporate capital investment growth is also projected to accelerate to about 2.8%.
The Japanese government states that it expects the country's economy to continue its moderate recovery in the fiscal year 2026, with a growth of approximately 1.3% in real terms for the year starting in April.
This forecast is 0.2 percentage points higher than that for the fiscal year 2025, when it was anticipated that the gross domestic product would grow by about 1.1%.
Personal consumption growth in the next fiscal year is expected to match this year's figure of around 1.3%.
Government representatives say they expect an increase in disposable income. The sharp rise in food prices is likely to slow down, and the temporary gasoline tax will be abolished.
Meanwhile, corporate capital investment growth is projected to accelerate to about 2.8%.
The government states that businesses are ready to invest more amid a labor shortage and planned corporate tax cuts to stimulate capital expenditures.
Officials predict that nominal GDP will grow by 3.4% in the next fiscal year. Growth rates are expected to be below 4.2%, as was the case this year, as inflation levels decrease.
Japan has also approved a record military budget for 2026 of over 9 trillion yen (48.82 billion euros). With these funds, the country intends to strengthen its strike capabilities and coastal defense by purchasing missiles, military drones, and more.
