Japan Economic Forecast

Japan Economic Outlook

March 3, 2020

The economy contracted at the fastest pace in five-and-a-half years in the fourth quarter of last year, as private consumption slumped following the consumption tax increase in October and the devastation wreaked by Typhoon Hagibis in the same month. Fixed investment also contracted sharply, as business confidence among large manufacturers dropped to a near seven-year low. Exports of goods and services dropped for the second consecutive quarter in Q4, although at a slower pace than in Q3. Turning to this year, prospects of an economic rebound appear to be waning, as the coronavirus outbreak in China has spread across the East Asia region and taken root in Japan, with hundreds of cases now reported nationally. The private sector PMI tumbled in February, indicating the fastest decline in activity in nearly six years, as service providers reported the spread of the virus was hampering tourism.

Japan Economic Growth

Economic growth will slow this year as the sales tax hike constrains private consumption and the coronavirus outbreak hampers activity. That said, the economy should benefit from ultra-low interest rates and low unemployment. A downside risk is the global coronavirus outbreak becoming a global pandemic, forcing the cancellation of the 2020 Summer Olympics. FocusEconomics panelists see the economy growing 0.3% in 2020, which is down 0.2 percentage points from last month’s forecast, and 0.8% in 2021.

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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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