Mount Fuji, Japan

Japan Economic Forecast

Japan Economic Outlook

GDP soared 6.0% in seasonally adjusted annualized terms in Q2, according to a preliminary estimate. The acceleration far outpaced market expectations as tourism led to a surge in exports. Foreign arrivals recovered to over 70% of pre-pandemic levels in June, in part thanks to the easing of border restrictions in April. That said, private spending, which makes up around 60% of Japan’s GDP, contracted 2.1% as the post-pandemic spurt in spending lost steam. With export growth normalizing and private spending remaining weak, our panelists expect GDP growth to cool to 0.2% in Q3. Business activity rose less in July–August than in Q2, and while the volume of goods exports rose more in July than in Q2, momentum has likely slowed since. In other news, according to recent media reports, the government will introduce new economic stimulus measures in September, likely centered around boosting wages and encouraging investment in new technology.

Japan Inflation

Inflation was steady at June’s 3.3% in July, while core inflation inched down to 3.1% from 3.2%. Our panelists see inflation cooling more this year on a tougher base effect but still averaging above the BoJ’s 2.0% target until Q2 2024. Price pressures will be supported by high energy prices and a rise in wage growth following this year’s wage negotiations.

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 4,237
GDP per capita (USD) 39,846 40,542 40,134 39,898 33,851
GDP (JPY bn) 556,630 557,911 539,285 550,074 557,227
Economic Growth (Nominal GDP, ann. var. %) 0.6 0.2 -3.3 2.0 1.3
Economic Growth (GDP, ann. var. %) 0.6 -0.4 -4.2 2.2 1.0
Domestic Demand (ann. var. %) 0.6 0.0 -3.4 1.2 1.6
Private Consumption (ann. var. %) 0.2 -0.6 -4.7 0.4 2.1
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 1.9
Government Investment (ann. var. %) 0.0 3.0 5.5 -8.0 -2.2
Fixed Investment (ann. var. %) 0.6 0.5 -3.5 0.2 -0.9
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 1.0 2.7 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) 232 236 259 255 261
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) 176.6 176.6 149.8 196.1 87.8
Current Account Balance (% of GDP) 3.5 3.5 3.0 3.9 2.1
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

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