Japan's economy is projected to expand at a moderate pace in 2026, with the IMF forecasting 0.7% real GDP growth and the Cabinet Office estimating 0.9% for the fiscal year, supported by real wage gains of 2.4% year-over-year in July and fiscal measures offsetting higher energy import costs. Official data show positive quarterly growth in Q2 2026 at 0.3% quarter-over-quarter, while the Japan Center for Economic Research's recession indicator stood at just 3.2% in August, reflecting sustained expansion and resilient domestic demand amid gradual Bank of Japan policy normalization. Market-implied odds above 95% align with this broad consensus among forecasters, though tail risks from prolonged Middle East tensions or sharper global slowdowns could pressure growth below zero in isolated quarters.