Mount Fuji, Japan

Japan Economic Forecast

Japan Economic Outlook

In a recent second release, quarter-on-quarter annualized GDP growth for Q2 was revised down to 4.8% from 6.0% in the first release. The downgrade was greater than the market had expected, with private spending contracting slightly more than originally estimated. Separate data showed that real wages fell 2.5% in the quarter, likely explaining the slowdown in consumer demand. That said, the 4.8% figure was still strong—the highest in a year—thanks to a surge in exports. Turning to Q3, our panelists expect GDP to broadly stagnate. Catch-up growth from the pandemic has now been largely exhausted; supply has caught up with demand, according to recently released figures from the Cabinet Office. In addition, after surging in Q2, exports are likely to normalize in Q3; in July–August, goods exports were down slightly compared to Q2.

Japan Inflation

Inflation dipped to 3.2% in August from 3.3% in July, while core inflation inched down to 3.0% from 3.1%. Our panelists see inflation easing from current levels ahead on a tougher base effect, but still averaging above the 2.0% target of the Bank of Japan (BOJ) until Q2 2024. Inflation will be supported by elevated energy prices and a rise in wage growth.

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 -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) 232 236 259 255 261
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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