Mount Fuji, Japan

Japan Economic Forecast

Japan Economic Outlook

GDP shrank more than expected in Q3, likely leading to more fiscal and monetary stimulus ahead. The contraction was due to a decline in fixed investment and a deceleration in exports. In addition, consumer spending unexpectedly dipped, likely due to the recent rise in inflation affecting household budgets more than expected. Turning to Q4, our panelists expect GDP to rebound. However, the recovery is expected to be weak, with catch-up growth from Covid-19 now largely exhausted; compared to Q3, in October, business activity grew less—according to the PMI—and consumer confidence slipped. As a result of this weak performance in H2 so far, in early November, the government unveiled a stimulus package worth JPY 17 trillion (around 3% of last year’s GDP). In addition, the Bank of Japan (BOJ) is now likelier to keep interest rates below zero for longer.

Japan Inflation

Inflation in Tokyo rose to 3.3% in October from 2.8% in September, while core inflation in the capital rose to 2.7% from 2.5%. Nationwide data will be released on 24 November. The rise will pressure the BOJ to tighten policy despite anemic growth. Nonetheless, our panelists expect inflation to average around the BOJ’s target in 2024, before averaging below it in 2025.

This chart displays Economic Growth (GDP, annual variation in %) for Japan from 2013 to 2022.

Japan Economic Data

2018 2019 2020 2021 2022
Population (million) 126 126 126 126 125
GDP (USD bn) 5,040 5,117 5,051 5,007 4,233
GDP per capita (USD) 39,846 40,542 40,134 39,898 33,821
GDP (JPY bn) 556,630 557,911 539,285 550,074 556,743
Economic Growth (Nominal GDP, ann. var. %) 0.6 0.2 -3.3 2.0 1.2
Economic Growth (GDP, ann. var. %) 0.6 -0.4 -4.2 2.2 0.9
Domestic Demand (ann. var. %) 0.6 0.0 -3.4 1.2 1.5
Private Consumption (ann. var. %) 0.2 -0.6 -4.7 0.4 2.0
Government Consumption (ann. var. %) 1.0 1.9 2.4 3.5 1.2
Private Non-Residential Inv. (ann. var. %) 2.3 -0.7 -4.7 1.1 1.8
Government Investment (ann. var. %) 0.0 3.0 5.5 -8.0 -2.4
Fixed Investment (ann. var. %) 0.6 0.5 -3.5 0.2 -1.0
Exports (G&S, ann. var. %) 3.8 -1.5 -11.6 11.9 5.1
Imports (G&S, ann. var. %) 3.8 1.0 -6.8 5.1 8.0
Industrial Production (ann. var. %) 0.6 -2.7 -10.4 5.4 -0.2
Nominal Retail Sales (ann. var. %) 1.7 0.1 -3.4 2.0 2.6
Unemployment (% of active population, eop) 2.5 2.2 3.0 2.7 2.5
Unemployment (% of active population, aop) 2.4 2.4 2.8 2.8 2.6
Fiscal Balance (% of GDP) -2.5 -3.0 -9.1 -6.2 -
Public Debt (% of GDP) 232 236 259 255 260
Inflation (CPI, ann. var. %, eop) 0.3 0.8 -1.2 0.8 4.0
Inflation (CPI, ann. var. %, aop) 1.0 0.5 0.0 -0.2 2.5
Inflation (Core, ann. var. %, eop) 0.8 0.8 -1.1 0.6 4.0
Inflation (Core, ann. var. %, aop) 0.9 0.6 -0.2 -0.2 2.3
Inflation (PPI, ann. var. %, aop) 2.6 0.2 -1.2 4.6 9.8
BOJ Policy Rate (%, eop) -0.10 -0.10 -0.10 -0.10 -0.10
TONAR (%, eop) -0.06 -0.07 -0.03 -0.02 -0.02
10-Year Bond Yield (%, eop) 0.00 -0.03 0.02 0.07 0.41
Stock Market (ann. var. of Nikkei 225, %) -12.1 18.2 16.0 4.9 -9.4
Exchange Rate (JPY per USD, eop) 110 109 103 115 132
Exchange Rate (JPY per USD, aop) 110 109 107 110 132
Current Account Balance (USD bn) 176.6 176.6 149.8 195.6 81.5
Current Account Balance (% of GDP) 3.5 3.5 3.0 3.9 1.9
Merchandise Trade Balance (USD bn) 13 -1 25 16 -123
Merchandise Exports (USD bn) 736 697 629 749 751
Merchandise Imports (USD bn) 723 698 604 733 874
Merchandise Exports (ann. var. %) 7.0 -5.2 -9.8 19.1 0.2
Merchandise Imports (ann. var. %) 12.4 -3.5 -13.4 21.4 19.1
Foreign Direct Investment (USD bn) 10.0 13.8 10.7 24.7 32.5

Free Sample Report

Interested in Japan economic reports, analysis and data? FocusEconomics provides data, forecasts and analysis for hundreds of countries and commodities. Request your free sample report now.

Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest