Global Economic Outlook, April 2026

The global economy enters April 2026 with slower growth, easing but still uneven inflation, and rising sensitivity to central bank policy, energy prices, and geopolitical risks. This outlook reviews the key trends across the U.S., UK, euro area, China, and Japan, highlighting what investors and traders should watch in growth, inflation, labor markets, and monetary policy in the weeks ahead.

USA

The US economy enters April 2026 with slower but still positive growth, easing inflation, and a labor market that is softening without fully breaking. This outlook explores the key data, Federal Reserve expectations, consumer and business trends, and the main risks facing markets, including oil prices, fiscal pressures, and shifting rate-cut expectations.

US March Economic Review

The U.S. economy in March 2026 remained in expansion, but the overall picture became more uneven and fragile. Growth did not collapse, yet momentum clearly slowed from late 2025, while inflation stayed sticky enough to keep the Federal Reserve cautious. The result was an economy still moving forward, but with less room for disappointment and fewer signs of broad-based strength.

The labor market was still functioning and continued to support activity, but it no longer looked fully reassuring. Jobless claims and layoffs did not point to a breakdown, yet the month also brought a weak payrolls report, softer private hiring, a small rise in unemployment, and weaker participation. Wage growth remained firm, which supported incomes but also added to inflation persistence. In short, labor was still a stabilizer, but visible cracks began to emerge.

Consumer demand held up better than some headlines implied. Retail sales were mixed, but the GDP-relevant categories remained relatively solid, and personal spending continued to rise. However, real gains were modest because inflation still absorbed part of household purchasing power. Consumers appeared more cautious, more selective, and less confident, suggesting slower spending growth ahead rather than a sharp pullback.

On inflation, progress continued, but not enough to declare victory. Headline CPI and PCE no longer pointed to broad reacceleration, yet core inflation—especially core PCE—remained sticky. Producer prices, wage pressures, and survey-based price indicators all suggested that underlying domestic cost pressures were still alive. The “last mile” of disinflation remained difficult.

That left the Federal Reserve in a constrained position. The Fed kept rates unchanged at 3.75%, but the tone stayed cautious, not dovish. Policymakers were dealing with slower growth on one side and persistent inflation plus energy-related geopolitical risks on the other. As long as wages, services inflation, and energy prices stay elevated, rapid rate cuts remain unlikely.

Across sectors, services remained the main growth anchor, while manufacturing showed resilience but uneven improvement. Housing stayed fragile and highly rate-sensitive, with mixed signals across sales, starts, permits, and mortgage activity. Business investment slowed but did not collapse, while the external sector was one of the brighter spots as trade improved. The main near-term risk came from energy, which could keep inflation elevated and squeeze real incomes. Overall, the U.S. economy still looked more resilient than weak, but the balance between slower growth and sticky inflation became harder to sustain.

US Economic Outlook for April 2026

US Economic Outlook for April 2026 points to an economy that is slowing but not collapsing. The broad picture is one of moderation: growth is cooling toward around 2%, inflation is easing but remains vulnerable to energy shocks, and the labor market is sending mixed signals. Payroll growth has weakened, yet weekly unemployment claims remain relatively low, suggesting that labor conditions are softer but not in recession territory. This combination supports the view that the economy is losing momentum gradually rather than facing an abrupt downturn.

A major focus in April will be the incoming employment data. The March jobs report, due in early April, is expected to clarify whether February’s negative payroll surprise was temporary or the start of a broader slowdown. The expectation is for a modest rebound, with slightly more than 50,000 jobs added and unemployment steady at 4.4%. Wage growth has slowed from its earlier peaks but is still firm enough to support consumer spending while also keeping some inflation pressure alive. In short, the labor market is loosening, but it has not broken.

On inflation, the outlook is more encouraging, though not fully comfortable. February CPI and core CPI showed inflation moderating toward the Fed’s target, but March data may reflect renewed pressure from oil, especially because Persian Gulf and Strait of Hormuz tensions have pushed energy prices sharply higher. Market-based inflation measures suggest investors expect a short-term inflation bump, while longer-term expectations remain relatively anchored. That means inflation is improving overall, but geopolitical energy risks could delay further progress in the near term.

The growth outlook remains positive but softer. First-quarter GDP, due at the end of April, is expected to show modest expansion near the Fed’s 2% forecast. Consumer spending still appears to be the main engine of the economy, although higher prices, fading stimulus, and tighter funding conditions are starting to cool demand. Housing remains fragile but may benefit later if interest rates ease, while manufacturing is close to stagnation, with weak orders and persistent input-cost pressure. Surveys and regional Fed data suggest factory activity remains a drag rather than a driver of growth.

For the Federal Reserve, the most likely outcome is continued patience. The Fed is expected to hold rates steady at the April 28–29 meeting, maintaining the 3.50%–3.75% range. The base case is just one 25-basis-point cut in late 2026, with another in mid-2027. However, that path depends heavily on whether inflation continues to ease. If oil prices remain high or inflation expectations drift upward, rate cuts could be delayed further, and a hike cannot be ruled out as a risk scenario.

Finally, markets and fiscal policy add another layer of caution. Treasury yields remain high, the yield curve is still inverted, credit stress indicators have risen, and the VIX remains elevated because of geopolitical and policy uncertainty. Large fiscal deficits are expected to persist, raising concerns about debt, bond supply, and long-term yields. Overall, the outlook for April is for an economy that is cooling, still expanding, and increasingly exposed to inflation, energy, and policy risks.

UK outlook for April 2026

The UK outlook for April 2026 is one of cautious stagnation. Key releases (GDP, CPI, jobs) will guide whether BoE starts cuts soon. Current market pricing is leaning hawkish (implying hikes) even though data and forecasters anticipate no hike. Inflation is expected to resume its downward trend, but upside shocks (e.g. oil) could reignite pressures. Watching the April 30 MPC decision and its new forecasts will be crucial.

UK economy Review in March

The UK economy in March 2026 remained in expansion, but only at a weak and uneven pace. The country avoided recession, and some sectors—especially services, parts of housing, and some consumer activity—continued to show resilience. However, the broader pattern was still fragile. Growth remained slow, confidence weakened, manufacturing and construction were soft, credit conditions stayed restrictive, and inflation was sticky enough to keep the Bank of England cautious. The overall impression was not of collapse, but of an economy still struggling to regain convincing momentum.

The clearest message from the month was that growth continued, but only marginally. January GDP was flat month on month, while the three-month-on-three-month growth rate held at just 0.2%. Business surveys told a similar story: PMI readings stayed above the 50 threshold, meaning activity was still expanding, but the pace clearly weakened over the month. This suggests the UK was still moving forward, but at a speed too low to feel secure.

The services sector remained the main support for the economy. Services PMI readings stayed in expansion territory, and this sector once again carried much of the growth burden because manufacturing and construction remained weaker. Still, services lost momentum by the end of the month, indicating that while they were strong enough to prevent sharper weakness, they were not strong enough to drive a robust recovery.

By contrast, manufacturing, industry, and construction stayed soft. Manufacturing output rose only slightly, industrial production fell, and survey evidence suggested only limited stabilisation rather than a true rebound. Construction presented mixed data, with a small rise in official output but a much weaker PMI reading that pointed to contraction. These sectors were not collapsing, but they remained drags on broader economic momentum.

The labour market remained relatively resilient, though it no longer looked fully reassuring. Employment rose strongly and unemployment stayed at 5.2%, but the claimant count also increased, showing some underlying weakness. Wage growth slowed, which is helpful for inflation but also reflects a softer labour environment. Overall, the labor market remained stable, but signs of gradual cooling became more visible.

Inflation remained one of the main constraints on the outlook. Headline CPI held at 3.0%, while core CPI edged up to 3.2%, showing that domestic price pressures were still persistent. Some retail price measures softened, but inflation progress was uneven and not yet convincing enough for policymakers. That explains why the Bank of England kept rates unchanged at 3.75%, with all nine MPC members voting for no change. The unanimous decision was more hawkish than expected and signaled that the Bank still sees inflation as too sticky to justify early cuts.

On the consumer side, households were still spending, but with less momentum and weaker confidence. Retail sales fell on the month, though annual growth remained positive. Consumer confidence indicators weakened further, showing households were cautious even where spending had not collapsed. Housing was mixed but held up better than feared, while credit conditions remained soft, limiting stronger recovery. One of the few brighter areas was trade, where the deficit narrowed sharply and offered some support to growth. Overall, March left the UK looking like a slow-growth economy with clear stagnation risk: still expanding, but constrained by sticky inflation, restrictive policy, weak confidence, and uneven sector performance.

UK economic outlook for April 2026

The UK economic outlook for April 2026 points to a modestly slowing economy with inflation still above target and a labor market that is gradually weakening. Growth has remained weak rather than recessionary, with GDP expanding only slightly in late 2025 and early 2026. Business surveys suggest the economy is still growing, but only at a slow pace, with manufacturing under pressure and services only slightly positive. Consumer spending is also subdued, reflecting fragile household demand and weak confidence. Overall, the UK appears stuck in a low-growth environment rather than entering a strong recovery.

A central focus in April is the Bank of England meeting on April 30, when the BoE is expected to keep the Bank Rate at 3.75% and release new forecasts. The March meeting already showed a more hawkish tone than markets expected, with a unanimous 9–0 vote to leave rates unchanged and no support for an immediate cut. That vote suggested policymakers remain concerned about inflation persistence and are not ready to signal near-term easing. For April, the most likely outcome remains another hold as the BoE balances stubborn inflation against evidence of weakening growth and rising slack in the economy.

On inflation, the picture has improved somewhat but is still uncomfortable. CPI eased to 3.0% in February, but core CPI rose to 3.2%, showing that underlying price pressures remain sticky. Clothing prices helped keep inflation elevated, while lower fuel prices provided some relief. Looking ahead, inflation may remain in the 3%–3.5% range in early 2026, especially if oil and gas prices rise again, before gradually falling toward 2% later in the year if energy pressures fade. That makes energy one of the main upside risks to the outlook.

The labor market is also cooling more clearly. Unemployment rose to 5.2%, the highest in around five years, while youth unemployment is especially high. Employment growth has stalled, vacancies have declined, and wage growth has slowed, with earnings growth falling below 4%. This easing in pay growth could help the inflation outlook, but it also reinforces the message that labor-market conditions are softening.

Financial markets reflect this uneasy balance. Gilt yields have risen sharply, with the 10-year yield near 4.92%, and sterling has been mixed—stronger against the euro at times, weaker against the dollar. Markets are watching whether inflation risks force the BoE to stay restrictive for longer or whether weaker growth eventually opens the door to cuts. In short, the UK enters April with slow growth, easing but still elevated inflation, a softer labor market, and a central bank that remains cautious.

EU

The euro area enters April 2026 with weak growth, easing but still sticky inflation, and a recovery that remains uneven across member states. This outlook examines the region’s key economic trends, including consumer demand, labor-market conditions, ECB policy expectations, and the main risks to growth, from soft confidence and weak domestic momentum to energy prices and external shocks.

The euro area in March 2026

The euro area in March 2026 remained in expansion, but only at a weak and increasingly fragile pace. Growth did not collapse, and the labor market continued to provide a cushion, yet the region still lacked a durable engine of recovery. Manufacturing showed tentative signs of stabilization, but services lost momentum, construction stayed weak, confidence deteriorated sharply, and trade became less supportive. Inflation was no longer a crisis, but it remained sticky enough in core areas to keep the European Central Bank cautious.

The broad growth picture was one of low-speed expansion. Euro-area GDP in the fourth quarter rose only 0.2% quarter on quarter and 1.2% year on year, both softer than expected. Survey data told a similar story: composite PMI readings stayed just above the 50 line, but by late March they moved closer to stagnation. The euro area was therefore still growing, but only marginally and without much protection against fresh shocks.

On inflation, the situation improved compared with the earlier crisis period, but underlying pressures had not disappeared. February inflation came in hotter than expected, with headline CPI at 1.9% and core CPI at 2.4%. Monthly price readings also rebounded, showing that disinflation was continuing, but not smoothly enough to remove inflation from the policy debate. Producer prices remained mixed: annual PPI was still negative, reflecting past industrial weakness, but monthly PPI rose strongly, showing that price pressure could return quickly if energy or input costs increased again.

The ECB remained firmly in wait-and-see mode. It left rates unchanged, with the deposit rate at 2.00%, the main refinancing rate at 2.15%, and the marginal lending facility at 2.40%. That stance reflected a difficult balance: inflation was not weak enough to justify a clearly dovish turn, but growth and confidence were too soft to support any hawkish shift. The ECB therefore stayed patient, but not comfortable.

The labor market remained one of the region’s strongest stabilizers. Unemployment held at 6.1%, employment growth remained positive, and wage growth cooled somewhat. That combination helped consumption while also reducing some inflation pressure. Still, the economy’s other sectors looked much less convincing. Manufacturing PMI improved above 50, suggesting stabilization in surveys, but hard industrial data remained weak. Services stayed in expansion, but momentum fell sharply by the end of the month, which mattered because services had been the main growth support. Construction remained in contraction and continued to drag on activity.

Consumer demand held up only selectively. Retail sales were mixed, confidence indicators were poor, and sentiment deteriorated sharply across the bloc. Germany and France remained particularly weak, while Spain looked more resilient. Trade and credit conditions were no longer strong supports either. Overall, March left the euro area looking like a subdued, uneven, and vulnerable economy: still expanding, but with fading momentum, weak confidence, and no broad-based recovery engine.

The euro area outlook for April

The euro area outlook for April 2026 points to an economy that is slowing modestly rather than collapsing. Growth remains close to stagnation, inflation is easing but still vulnerable to energy shocks, and the labor market is holding up better than demand. Official data show Q4 2025 GDP at just +0.2%, while early 2026 indicators suggest Q1 growth may be around 0.0% to 0.2%, with only a mild recovery possible in the second quarter if energy prices ease. The broader picture is one of weak expansion, limited domestic demand, and sensitivity to external shocks.

A major issue remains consumer demand. Retail sales in the euro area fell 0.1% month on month in January 2026, and weak consumer confidence continues to limit household spending. Higher energy bills may keep nominal spending supported, but in real terms demand remains fragile. This means consumption is not currently strong enough to provide a convincing growth engine for the region. As a result, the outlook for both GDP and retail activity in April remains soft, especially if energy prices stay high.

On inflation, the trend has improved, but not decisively. Euro-area inflation rebounded slightly to 1.9% after touching 1.7%, yet the inflation is unlikely to rise sharply on a sustained basis unless energy prices increase much more or wage growth accelerates again. Weak demand should keep broader inflation pressures contained, though the recent Middle East energy shock has already pushed market inflation expectations higher. In other words, inflation is no longer the dominant crisis it once was, but it is still uncertain enough to keep policymakers cautious.

The labor market remains one of the more stable parts of the euro-area economy. Unemployment is still low by historical standards, around 6.2% to 6.4%, although job growth has slowed and labor-market tightness is easing. Wage growth of roughly 3.0% in Q4 2025 is lower than in the post-pandemic period, which should help reduce wage-driven inflation pressure over time. This supports the view that labor conditions remain firm enough to cushion the economy, but not strong enough to create major inflationary demand pressure.

For the ECB, the most likely outcome is no policy change at the April 29–30 meeting. Rates remain at 2.00% for the deposit facility, 2.15% for refinancing operations, and 2.40% for the marginal lending facility. Markets have become somewhat more hawkish due to geopolitical tensions and energy risk, and an additional 25 basis points of tightening later in 2026 is presented as a possible scenario if inflation risks worsen. But for April, the central expectation is that the ECB will hold and wait for more evidence.

Financial markets reflect this uncertainty. Sovereign yields have risen, equities have been volatile, and the euro has remained relatively stable near $1.15 against the dollar. The main swing factors for the euro area now are energy prices and consumer demand. If oil retreats and inflation eases further, growth can remain weak but positive. If the Middle East conflict intensifies and oil rises above $100, the euro area could face renewed inflation, weaker growth, wider spreads, and tighter credit conditions. Overall, April begins with the euro area still expanding, but in a fragile, low-growth, shock-sensitive state.

China Outlook April 2026

China enters April 2026 with steady growth, supportive policy, and improving industrial momentum, but the recovery remains uneven as weak domestic demand and property-sector stress continue to weigh on confidence. This outlook reviews the key trends shaping China’s economy, including GDP, retail sales, inflation, PBOC policy, credit conditions, and the main risks for markets and growth in the weeks ahead.

China’s economy in March 2026

China’s economy in March 2026 appeared firmer on the surface, but the recovery remained uneven and incomplete. The main supports were industry, exports, credit growth, and a modest improvement in inflation, while the main weaknesses were still property, labor-market softness, and incomplete domestic-demand recovery. The best way to describe the month is that China was stabilizing, not accelerating.

On overall activity, the economy continued to expand, but not with strong self-sustaining momentum. Hard data improved, with industrial production, retail sales, and fixed-asset investment all showing better results. However, the survey picture remained divided. Official PMIs stayed below 50, signaling contraction in the broader economy, while private-sector PMIs showed much stronger expansion in both manufacturing and services. This suggests China is still operating as a two-speed economy, where stronger and policy-supported areas are performing better than the broader domestic base.

Policy remained supportive but cautious. The PBoC left the 1-year Loan Prime Rate at 3.00% and the 5-year rate at 3.50%, signaling that Beijing did not see the need for aggressive new easing. At the same time, authorities maintained a supportive framework, including a 2026 GDP target of 4.5%–5.0%, a 2% CPI target, and a fiscal deficit target of 4% of GDP. The message was that policymakers still want stability, but through targeted support, financial resilience, and technology upgrading, not broad stimulus.

The industrial sector was one of the clearest bright spots. Industrial production rose 6.3% year on year, and industrial profits also increased strongly, helped by sectors such as electronics and non-ferrous metals. But even here the recovery was not broad-based, as official and private surveys still showed uneven performance across firms and sectors.

On the consumer side, conditions improved but remained far from fully normalized. Retail sales rose 2.8% year on year, and private services PMI was especially strong. Still, some of that strength may have been supported by holiday effects, and household spending remained modest rather than booming. The labor market reinforced this caution: the urban unemployment rate rose to 5.3%, showing that stronger output data had not yet translated into a convincing jobs recovery.

Inflation improved, reducing some deflation concerns. CPI rose 1.3% year on year and core CPI accelerated to 1.8%, but PPI remained negative, showing that producer-side weakness had not disappeared. Meanwhile, the property sector remained the main structural drag, with house prices still falling. The external sector continued to carry much of the recovery, with strong exports, imports, and a large trade surplus, while credit conditions stayed supportive. Overall, March showed a China economy that was more stable than weak, but still heavily dependent on policy support, exports, and strategic industry, rather than a broad domestic recovery.

China’s April 2026 economic outlook

China’s April 2026 outlook points to an economy that is still growing at a respectable pace, but with clear internal imbalances. Q1 GDP rose 5.4% year on year and 1.2% quarter on quarter, supported mainly by industrial output, exports, and some carryover from government stimulus. However, that headline strength masks a less convincing domestic picture: retail sales, household demand, and property investment remain weak, and the recovery still depends more on policy support and external demand than on broad-based internal momentum.

A key theme is the contrast between strong production and weak consumption. Industrial activity and exports have held up relatively well, while consumer demand remains subdued. Retail sales grew only 2.8% in January–February, and March was expected to remain similarly soft. Households are still cautious because job growth is weak, wage gains are limited, and the property downturn continues to weigh on confidence and wealth. High household savings and a weak property wealth effect are also limiting spending. Online retail remains stronger than traditional spending, but overall consumption is still not strong enough to drive the economy on its own.

On inflation, China remains in a very different position from most major economies. Consumer inflation is still low, around 1%, while producer prices are still falling. That gives the PBOC room to maintain a supportive, dovish stance. The market expects “moderately loose” monetary policy to continue, with little chance of tightening in the near term. Rather than cutting benchmark interest rates immediately, policymakers are more likely to rely on tools such as reserve requirement ratio cuts, targeted relending, and medium-term liquidity injections. The PBOC already injected 500 billion yuan via the MLF in late March, and April’s Loan Prime Rate fixing is expected to remain unchanged, with the 1-year LPR at around 3.00% and the 5-year LPR around 3.5%.

Fiscal policy is also set to remain supportive. Authorities have maintained a 2026 growth target of 4.5%–5.0% and are using state-bank capital injections, trade-in subsidies, and local-government bond issuance to support lending, infrastructure, and domestic demand. Still, policymakers do not appear ready to launch a massive stimulus package. Their approach remains targeted and pragmatic, especially as they continue to manage local government financing pressures and the unresolved property slump.

The property sector remains one of the biggest structural risks. Support measures may continue on a selective basis—such as lower mortgage rates in some cities and looser home-purchase rules—but large-scale rescue measures seem unlikely. That means housing will probably remain a drag on growth, household confidence, and local government finances.

Financial markets reflect this mixed picture. Bond yields remain low, the yuan is relatively stable around 6.88–6.91 per dollar, and FX forwards imply only modest depreciation pressure. Chinese equities have pulled back recently, though they remain up on the year. Overall, the April outlook is for a China economy that is stable and policy-supported, but still constrained by weak domestic demand, property stress, and external uncertainty. The recovery is real, but it remains uneven and not yet fully self-sustaining.

Japanese Economic Outlook for April 2026

Japan enters April 2026 with moderate growth, firm corporate activity, and a Bank of Japan that remains on a gradual normalization path, but the outlook is still shaped by weak household demand, soft inflation dynamics, and yen volatility. This outlook reviews the key trends in Japan’s economy, including growth, wages, inflation, BoJ policy, the yen, and the main risks and opportunities for markets in the weeks ahead.

March Review

Japan’s economy in March 2026 remained in expansion, but the recovery looked increasingly uneven. The strongest parts of the picture were corporate investment, manufacturing, trade, and overall business activity, while the weaker parts were household spending, parts of the services sector, and the domestic-demand story more broadly. In short, Japan was still moving forward, but the recovery remained unbalanced between a firmer corporate and external side and a more fragile household side.

The overall growth backdrop improved somewhat during the month. Revised Q4 GDP was lifted to 0.3% quarter on quarter and 1.3% annualized, with both private consumption and business investment revised higher. Leading and coincident indicators also improved, suggesting the economy entered 2026 with better momentum than previously thought. However, later March PMI readings showed a slower pace of expansion, indicating that growth was still present but not broad enough to remove concerns about durability.

The Bank of Japan stayed cautious while maintaining a longer-term tightening bias. It left rates unchanged at 0.75%, signaling that policymakers still prefer patience. At the same time, official communication continued to suggest a gradual path toward normalization, based on the belief that underlying inflation is rising, even if the 2% inflation target is not yet fully secure on a stable basis. March therefore reinforced the idea that the BoJ is not finished with normalization, but it is moving very slowly and will remain heavily data-dependent.

Inflation was mixed. Official headline CPI slowed to 1.3% year on year, while standard core CPI eased to 1.6%, partly because government subsidies continued to suppress fuel and utility costs. But beneath the softer headline, underlying inflation remained firmer. The BoJ’s adjusted core gauge was 2.2%, and services producer prices rose 2.7%, showing that wage- and service-led inflation pressures were still active. This means Japan was not slipping back into deflation, but it was dealing with a more complicated inflation picture than the headline alone suggested.

The labor market remained supportive, though slightly less tight than before. Unemployment rose to 2.7%, and the jobs-to-applicants ratio edged lower, pointing to a mild loosening. Even so, wage data stayed constructive, with earnings and wage income both rising 3.0% year on year. That matters because the BoJ’s normalization story depends on durable wage gains feeding a more sustainable inflation environment.

The clearest weakness remained the household sector. Real household spending fell, and despite better wages, consumers still appeared cautious as higher prices and a weak yen weighed on purchasing power. By contrast, business investment was a major positive, with capital spending up 6.5% year on year, while industrial production, machine tool orders, and exports also improved. Overall, March showed a Japan economy in a genuine but fragile transition: stronger on the corporate and external side, but still lacking a fully secure domestic-demand foundation.

April Outlook

Japan’s April 2026 economic outlook points to a moderately growing economy that is still supported by domestic demand and investment, but increasingly shaped by policy normalization, external risks, and the weak yen. Growth expectations for fiscal year 2026 remain modest, around 0.7%–1.0%, while inflation is expected near 1.5%–2.0%. Recent data suggest that consumption and investment still provide some support, but inflation has softened more than expected, largely because of government subsidies and energy-related measures.

The key domestic policy issue is the Bank of Japan’s tightening cycle. After raising the policy rate to 0.75%, the BoJ is now widely expected to continue moving gradually toward a more normal policy stance. Markets have priced a meaningful probability of another rate hike by mid-2026, though June or July may be more likely than April. Policymakers appear inclined toward further hikes if underlying inflation remains close to 2%, especially once temporary subsidy effects are stripped out by a new inflation indicator expected later in the year.

For April itself, the most important event is the BoJ meeting on April 27–28, when the central bank is expected to leave rates unchanged but release updated forecasts and guidance. The main question is not whether the BoJ hikes immediately, but whether it signals continued tightening ahead. Markets will also watch the April 23 national CPI release, since February core inflation slowed to 1.6% year on year, below the 2% target, while Tokyo inflation stayed firmer. That weaker core CPI complicates the BoJ’s message because it reflects policy subsidies more than underlying demand weakness.

Fiscal policy is still supportive. Japan’s FY2026 budget is set at a record ¥117 trillion, reflecting ongoing stimulus and subsidies. Government support in areas such as fuel, tuition, infrastructure, childcare, and digitalization should continue to support growth, even as public debt remains extremely high. Financial conditions are still accommodative overall, but they are tightening compared with Japan’s previous ultra-loose environment.

The yen remains a major source of uncertainty. It is still weak because of the large interest-rate gap with the United States and Japan’s dependence on imported energy. A weaker yen supports exporters, but it also raises import costs and inflation pressure. The authorities have said they are ready to intervene if yen weakness becomes excessive, especially if it moves well beyond recent levels.

In markets, Japanese equities have been volatile, supported by earnings and yen weakness but pressured by higher rates. Overall, April begins with Japan in a transition phase: growth is still positive, policy is normalizing, and markets are increasingly sensitive to inflation, wages, global commodity prices, and exchange-rate moves.