Japan Economic Forecast

Japan Economic Outlook

March 26, 2019

Despite a confirmed rebound in economic activity in the fourth quarter of last year, available data suggests that growth was weak in the first quarter of 2019. The average manufacturing PMI hit an over two-year low in Q1, as nominal exports contracted for the third consecutive month in February amid an economic slowdown in China. Moreover, consumer confidence deteriorated markedly at the outset of the year, which does not bode well for private consumption this year, while machinery orders—a leading indicator for investment in the coming three to six months—contracted for the third period in a row in January. In light of recent developments, the government downgraded its assessment of the economy for the first time in three years on 20 March. This could prompt Prime Minister Shinzo Abe to take action ahead of the election in the upper house, which is to be held this July.

Japan Economic Growth

Frontloaded consumer spending ahead of the planned sales tax hike in October and a recovery in gross fixed investment—partially due to works related to the Tokyo 2020 Olympic Games—will shore up economic growth this year. On the downside, the economy will feel the pinch of weak global demand, especially from China and Europe. FocusEconomics panelists see the economy growing 0.8% in 2019, which is down 0.1 percentage points from last month’s forecast, and 0.6% in 2020.

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Japan Facts

Bond Yield-0.03-4.41 %Apr 22
Exchange Rate111.9-0.35 %Apr 22
Stock Market22,2180.40 %Apr 22

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