FY2026 Report: Challenges of a Full-Scale Shift to a Growth-Oriented Economy | Chapter 2Real Economy Recovers Gradually Amid Price and Labor Shortages

In fiscal 2025, real GDP growth was 0.8% year on year and nominal GDP growth was 4.1%, with private consumption and business investment driving growth.

Production, services, corporate earnings, and business investment were generally solid, but rising crude oil prices pressured petroleum and coal products, the chemical industry, and households' real purchasing power.

The share of oil-related spending was higher among low-income households; average monthly gasoline spending was approximately 8,500 yen in towns and villages and approximately 2,500 yen in large cities, so the burden of rising prices varies by income group and region.

The employment rate remained approximately 62% and the unemployment rate in the mid-2% range, while severe labor shortages in construction and nursing care could lead to supply constraints for businesses and delays in public works.

Spending on durable goods, dining out, and travel to Japan recovered. Housing investment remained weak after the reactionary decline associated with the mandatory compliance with energy-efficiency standards in April 2025, and new energy-efficiency standards are scheduled to apply in April 2027.

In accepting foreign workers, the specified skilled worker system will be supplemented by a transition from the technical intern training system to the employment for skill development system in April 2027. Support in language and cultural matters and improvements to public services are also needed.

The potential growth rate remained in the mid-0% range on average from the first quarter of 2020 through the first quarter of 2026, making the strengthening of supply capacity through labor-saving investment and capital accumulation a long-term challenge.