Japan Economic Forecast

Japan Economic Outlook

September 25, 2018

A more complete GDP estimate showed that the economy rebounded in Q2 at a stronger pace than previously reported on the back of surging investment, especially in the non-residential sector. Strong corporate earnings and still positive business sentiment are propelling investment growth. However, despite accelerating in Q2, private consumption remains weak as a tight labor market has not yet translated into a boost to workers’ paychecks. Exports, meanwhile, continued to post positive figures in August, mostly due to solid shipments to China. That said, the contribution to overall growth will likely diminish in Q3 as rising oil prices pile pressure on the trade balance, which swung to a deficit in July and August. In the political arena, Prime Minister Shinzo Abe was reelected leader of the ruling Liberal Democratic Party (LDP) by a landslide on 20 September. Now on course to become Japan’s longest-serving leader, his victory may embolden him to revise the country’s pacifist constitution.

Japan Economic Growth

Economic growth will remain broadly stable next year mostly propelled by solid domestic demand. An ever-tighter labor market is expected to fuel wage growth, while industrial upgrades and the 2020 Tokyo Olympics will bolster investment. Risks mostly stem from rising trade protectionism, slow global economic growth and the effects of a planned sales tax hike in October 2019. FocusEconomics panelists see the economy growing 1.0% in 2018 and 1.1% in 2019, which is up 0.1 percentage points from last month’s forecast.

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Japan Facts

ValueChangeDate
Bond Yield0.15-4.41 %Oct 16
Exchange Rate112.3-0.35 %Oct 16
Stock Market22,5490.40 %Oct 16

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