Implications Of Output Gap And Potential Growth Rate For Monetary Policy And Public Private Investments

The BOJ maintains a positive output gap of 0.53% for early 2026, keeping monetary policy normalization steady. However, structural supply constraints and government fiscal initiatives create upward pressure on JGB yields.

Key Takeaways

• 1.The BOJ output gap for Jan–Mar 2026 was +0.53%, marking the 17th consecutive positive reading.
• 2.Japan's potential growth rate remains steady at approximately 0.7%, with supply constraints in construction and labor hindering capital stock expansion.
• 3.Government fiscal stimulus and public investment may risk crowding out private investment and exacerbating inflation if supply capacity does not expand.

Table of Contents

• Implications of output gap and potential growth rate for monetary policy and public-private investments
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