Japan Economic Forecast

Japan Economic Outlook

August 28, 2018

The economy recovered vigorously in the second quarter following the contraction in the previous quarter. Private consumption benefited from summer bonuses and a tight labor market, which propelled wage growth, especially in May and June. Investment also posted significant gains in Q2, reflecting works related to the 2020 Tokyo Olympics and businesses trying to automatize processes in a context of labor shortages. On the flip side, the external sector weakened in Q2 amid growing global trade tensions. Early data for Q3 suggests solid domestic economic dynamics are supporting overall growth. In the political arena, Japan's ruling Liberal Democratic Party (LDP) will elect its new leader on 20 September. If incumbent Prime Minister Shinzo Abe wins the vote, it will pave the way for him to become Japan’s longest-serving leader.

Japan Economic Growth

Accommodative financial conditions, a robust labor market and construction projects related to the 2020 Tokyo Olympics will bolster growth in the coming quarters. However, risks are looming on the horizon: Rising trade protectionism could hurt Japan’s all-important external sector, while mounting geopolitical risks could strengthen the yen. Met the why particular panelists see the economy growing 1.0% in 2018, which is down 0.1 percentage points from last month’s forecast, and 1.0% again in 2019.

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Japan Facts

Bond Yield0.12-4.41 %Sep 20
Exchange Rate112.5-0.35 %Sep 20
Stock Market23,6750.11 %Sep 20

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