Japan Economic Forecast

Japan Economic Outlook

October 27, 2020

Available data points to an improving but still-subdued panorama in the third quarter, following the sharp contraction sustained by the economy in the second quarter. The unemployment rate hit an over three-year high in August, while consumer confidence remained mired in pessimism, despite improving to its best level since February, likely keeping a lid on the rebound in private consumption in the third quarter. Moreover, the much-studied Tankan business confidence survey for Q3 remained deeply negative, boding ill for capital spending in the period. Turning to Q4, the economy began the period on a muted footing, with the composite PMI remaining deep in contractionary territory in October. Moreover, the recent resurgence in cases abroad could weigh on the external sector in the months ahead.

Japan Economic Growth

GDP is forecast to rebound in 2021 from the sharp downturn this year. Sustained government spending should bolster the recovery in domestic demand, while improving external demand should drive higher exports. However, persistent rates of new Covid-19 infections and a potential worsening of the China-U.S. trade conflict cloud the outlook. FocusEconomics panelists see the economy expanding 2.7% in 2021, which is unchanged from last month’s forecast, and 1.6% in 2022.

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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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