Japan Economic Forecast

Japan Economic Outlook

September 28, 2021

After detailed results showed the economy expanded at a faster rate than previously estimated in Q2, activity appears mild in Q3. The composite PMI fell in July and August as conditions soured amid a surge in Covid-19 cases through the summer months. Moreover, the extension of the state of emergency in several prefectures until the end of September has likely further suppressed activity. In politics, Prime Minister Yoshihide Suga announced on 3 September that he will not seek reelection at the ruling Liberal Democratic Party’s leadership election on 29 September, stepping down after just a year in office. Four candidates are currently in the running to take the reins, with polls indicating no outstanding favorite. Due to the LDP’s comfortable majority in parliament, the winner of that contest will very likely become the new PM and lead the party into general elections that must be held before 28 November.

Japan Economic Growth

The economy is projected to rebound this year, and growth is set to accelerate marginally in 2022. An uptick in private consumption on the back of pent-up consumer demand, combined with higher capital spending, should outweigh a slowdown in fiscal stimulus. However, the ongoing pandemic and its impact on supply chains remains a key determinant of the outlook. FocusEconomics panelists see the economy expanding 2.5% in 2021 and 2.6% in 2022, which is unchanged from last month’s forecast.

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Value Change Date
Bond Yield-0.02-4.41 %Dec 30
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