Japan Economic Forecast

Japan Economic Outlook

December 23, 2021

The economy shrank slightly more than previously estimated in Q3, according to detailed results, as the inhibiting effects of the state of emergency that ran through the entire period weighed on activity. However, conditions in Q4 appear much brighter as a surge in vaccinations and a dramatic reduction in daily Covid-19 cases since mid-August’s record levels allowed for the easing of restrictions at the outset of the quarter. Consumer sentiment clocked its highest level since before the pandemic in October–November, while the composite PMI remained in expansionary territory throughout the quarter and averaged far above its Q3 level. However, border restrictions were tightened in late November amid the global spread of the Omicron variant, limiting international arrivals to 3,500 a day and banning visitors from countries deemed as high risk.

Japan Economic Growth

GDP growth is set to accelerate in 2022 from this year’s projected level, with an improvement in household spending on the back of a release of pent-up consumer demand driving the upturn, bolstered by higher capital spending and robust government consumption. However, the ongoing pandemic and its impact on supply chains remains a key determinant of the outlook. FocusEconomics panelists see the economy expanding 2.8% in 2022, which is up 0.2 percentage points from last month’s forecast, and 1.4% in 2023.

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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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