Japan Economic Forecast

Japan Economic Outlook

June 2, 2020

The economy will likely contract for the third consecutive quarter in Q2 due to the coronavirus crisis and the declaration of a national state of emergency on 16 April, which gave power to prefecture governors to request people to stay at home. Although the private-sector PMI reading increased slightly in May, it still remained close to April’s reading, which was the lowest recorded since current data started being collected over a decade ago. To help businesses and consumers cope, the government rolled out stimulus worth roughly 20% of GDP in April, which subsumed previously announced stimulus and included subsidies for businesses to help them retain employees. On 27 May, the cabinet approved additional stimulus which doubled the amount previously provided, bringing the total to 40% of GDP. In the same month, Prime Minister Shinzo Abe ended the national state of emergency.

Japan Economic Growth

The economy will shrink this year, as the Covid-19 crisis disrupts business activity, weighs on consumption and investment appetite, and reduces overseas demand for Japanese exports. Moreover, the Tokyo Olympic Games have already been postponed until next year. That said, huge and coordinated fiscal and monetary policy stimulus should support economic activity. FocusEconomics panelists see the economy contracting 4.7% in 2020, which is down 0.8 percentage points from last month’s forecast, before growing 2.6% in 2021.

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Japan Facts

Value Change Date
Bond Yield-0.02-4.41 %Dec 30
Exchange Rate108.7-0.35 %Jan 01

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