Cabinet Office’s medium- to long-term economic and fiscal projections July 2026

Research evidence excerpt

Cabinet Office’s medium- to long-term economic and fiscal projections July 2026

ng reflected as stronger demand relative to

supply capacity. Thereafter, the growth rate of the GDP deflator moderates in all cases.

However, in Growth Strategy Realization Cases 1 and 2, where the effects of the growth

strategy are assumed to materialize, real GDP growth rises, while in the Current

Projection Case, low growth continues (Fig.1).

The primary balance turns into a JPY1.4trn surplus in FY2027 in all cases (Fig.2). In

Growth Strategy Realization Cases 1 and 2, the surplus then continues through the final

year of the projection period, FY2040, while in the Current Projection Case it falls back

into deficit in the final two years. Compared with the 24 June projection, the primary

balance improved in all cases, and even the Current Projection Case, which had not once

turned positive in the previous projection, now remains in surplus for some time. As noted

above, one difference from the previous projection is the incorporation of the FY2025

general account final accounts, in which FY2025 tax revenues were confirmed to have

exceeded the forecast by JPY3.5trn. With the revenue starting point having been raised,

the primary balance may have been revised higher over the projection horizon.

The debt-to-GDP ratio also improved overall, or it has been revised down relative to the 24

June projection, likely reflecting the improvement in the primary balance from the previous

projection. In Growth Strategy Realization Case 1, the debt-to-GDP ratio continues to

decline through FY2040. In Case 2, it starts to edge up from FY2037 onward, while in the

Current Projection Case it begins rising from FY2032 onward. These patterns are broadly

unchanged from the 24 June projection.