MNI BRIEF: IMF Ups Japan 2025 GDP To +1.1% From July 0.7%

The International Monetary Fund on Tuesday raised its forecast for Japan’s 2025 gross domestic product growth to 1.1% from 0.7% projected in July, and lifted its 2026 forecast to 0.6% from 0.5%, according to its latest World Economic Outlook.

Global growth in 2025 was revised up to 3.2% from 3.0% in July, while the 2026 forecast was unchanged at 3.1%. U.S. growth was upgraded to 2.0% in 2025 from 1.9% and to 2.1% in 2026 from 2.0%.

The IMF said the world economy had shown resilience to trade policy shocks, though “the drag from shifting policies is becoming visible in more recent data.”

For Japan, the IMF expects policy rates to be lifted “along broadly the same path as assumed in April,” gradually rising toward a neutral level of about 1.5% to keep inflation anchored near the Bank of Japan’s 2% target. 

The BOJ will update its medium-term growth and inflation outlook at its Oct 29-30 meeting.

The IMF cautioned that “policy space is constrained and vulnerabilities are high” amid slowing global growth and differing inflation trends, noting that “fiscal policy remains too loose in many of the largest advanced and developing economies.”

It added that central banks’ paths will increasingly diverge, with the U.S. Federal Reserve expected to reduce the federal funds rate slightly earlier than previously projected, reaching 3.50-3.75% by end-2025 and 2.75-3.0% around the end of 2028.