Japan Economic Forecast

Japan Economic Outlook

August 27, 2019

The economy surpassed expectations in the second quarter, with consumption benefiting from a 10-day holiday related to the imperial transition and front-loading ahead of the planned increase in the consumption tax in October. Despite soft machinery order readings—a leading indicator for capital expenditure—since the start of the year, investment was extremely robust in Q2. This was likely reflective of efforts by companies to boost productivity in the wake of shortages in the labor market. Real exports, however, contracted for the second quarter in a row amid rising global trade tensions. Looking ahead, the second quarter’s solid reading increases the likelihood that Prime Minister Shinzo Abe will press ahead with the sales tax hike in October, which will likely weigh on private consumption. Cause for concern also stems from exports declining yet again in July amid the escalating trade row between Japan and Korea.

Japan Economic Growth

The domestic economy is expected to drive economic growth this year due to a relatively healthy job market, construction works related to the 2020 Tokyo Olympics and solid investment. Subdued global demand, however, is hurting Japan’s all-important external sector. Supplementary public spending should limit the negative spillovers of the October sales tax hike. FocusEconomics panelists see the economy growing 0.9% in 2019, which is up 0.1 percentage points from last month’s forecast, and 0.5% in 2020.

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Japan Facts

Bond Yield-0.28-4.41 %Sep 04
Exchange Rate106.4-0.35 %Sep 04
Stock Market20,6490.40 %Sep 04

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