Japan Economic Forecast

Japan Economic Outlook

September 1, 2020

The economy was hit hard in Q2, according to preliminary GDP estimates, as the pandemic wreaked havoc on both the domestic and external sectors. Private consumption plunged on the back of restrictions enacted in April–May, with retail sales falling nearly 10% during the period, and softening foreign demand saw exports tumble across the quarter. While the lifting of the state of emergency in late May bodes well for a recovery in Q3, recent data suggests a fairly mild rebound: PMIs for both manufacturing and services were still subdued through August. Meanwhile, in the political sphere, Prime Minister Shinzo Abe is set to resign due to ongoing health problems once the ruling Liberal Democratic party selects a new leader. No significant changes in economic policy are expected in the short term, however.

Japan Economic Growth

This year, GDP is projected to contract sharply as domestic demand tumbles amid diminished consumption and investment. Moreover, the delaying of the Tokyo Olympic games will hit tourism. Substantial fiscal and monetary stimulus should soften the downturn, although stubbornly high Covid-19 case rates throughout August cloud the outlook. FocusEconomics panelists see the economy contracting 5.1% in 2020, which is down 0.3 percentage points from last month’s forecast, before growing 2.7% 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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