Japan Economic Forecast

Japan Economic Outlook

January 29, 2019

The economy likely rebounded in the fourth quarter following the third quarter’s dismal performance when a series of natural disasters severely disrupted economic activity. Industrial production was much stronger in October and November than the Q3 average, mainly due to solid domestic demand. Moreover, the unemployment rate likely remained at low levels in Q4, supporting private consumption. Looking forward, however, economic activity appears to be losing steam. The manufacturing PMI stalled in January, with new export orders dipping further as external demand started to falter. Moreover, Keidanren, Japan’s largest business organization, has not called for wage hikes this year as it did in 2018. This could compromise Prime Minister Shinzo Abe’s strategy of pinning hopes on strong consumption in order to ensure Japan doesn’t reexperience deflation.

Japan Economic Growth

Although the economy will expand at a broadly similar pace this year as in 2018, risks are clearly skewed to the downside. A planned sales tax hike in October is expected to hit growth by the end of the year, while an uncertain global trade outlook will dent the all-important external sector. FocusEconomics panelists see the economy growing 1.0% in 2019, which is unchanged from last month’s forecast, and 0.6% in 2020.

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Japan Facts

Bond Yield-0.01-4.41 %Feb 14
Exchange Rate110.5-0.35 %Feb 14
Stock Market21,1400.40 %Feb 14

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