Prime Minister Takashi Announces 3.4% GDP Growth Outlook for 2026 Amid China Export Restrictions and G7 Talks

Prime Minister Takashi’s Economic Growth Forecast

On the 12th, Prime Minister Sanae Takashi announced an expected nominal GDP growth of 3.4% in 2026, along with a 1.3% increase in real wages. She emphasized responsible fiscal policies and bold investments in key sectors to boost the economy. [1]

The Bank of Japan raised interest rates by 0.25% at its December meeting, supported by wage hikes and a weakening yen, with the government showing approval. Market watchers are closely watching for signs of easing concerns about financial stability. [1]

Finance Minister’s Confident Remarks

During a New Year’s celebration with business leaders, Finance Minister Katsuya urged for a “record-breaking high” in economic performance. With just two and a half months since Takashi’s cabinet took office, high approval ratings are fueling efforts to achieve a strong, resilient economy. [1]

Budget Developments

The 2026 budget proposal includes defense spending of about 9 trillion yen (a 3.6% increase) and government bond expenses of 31.28 trillion yen (up 10.8%). The yen’s depreciation and rising interest rates since Takashi’s administration began are impacting financial markets. [2]

China’s Export Restrictions Tighten

China is strengthening controls on exports of dual-use military and civilian items, raising concerns about impacts on Japan. As part of efforts to diversify supply chains and reduce dependency, Finance Minister Katsuya attended the G7 finance ministers’ meeting. [5]

During the meeting on the night of the 12th, discussions focused on building supply networks that are less reliant on China. Katsuya plans to explain Japan’s position on this issue. [5]

• Concerns over China’s monopoly on rare earth elements
• Despite worsening Japan-China relations, Chinese tourism to Japan increased by 22.8%, raising questions about potential self-restraint
• Ongoing analysis of how export restrictions and overtourism are affecting the economy

Prime Minister Takashi’s Political Schedule

Takashi is considering dissolving the House of Representatives at the start of the upcoming Diet session. She is also scheduled to meet with South Korean President Lee Jae-myung on the 13th. [4]

The government plans to integrate the supplementary budget with the 2026 budget, assuring that even if there are delays in execution, temporary funding will prevent economic disruptions. [4]

Regional Economic Conditions

In Ehime Prefecture, the economy is gradually recovering, though some sectors remain weak. This trend aligns with the broader national economic outlook. [6]

The removal of the temporary gasoline tax hike is expected to lower prices, sparking discussions about its impact on household budgets and consumer spending. [3]