Japan Economic Forecast

Japan Economic Outlook

February 26, 2019

The economy returned to growth in the fourth quarter following a short-lived contraction in Q3 when a series of natural disasters disrupted business and consumer activities. Domestic demand drove Q4’s recovery, while external demand remained relatively weak despite rebounding. Available data for this year suggests that growth momentum remains frail. Global trade uncertainty, the economic slowdown in China and a downturn in the global tech cycle are weighing on the external sector. This, in turn, hurt manufacturing activities, as reflected by the manufacturing PMI which hit a nearly three-year low in February. Moreover, the lack of progress made in Prime Minister Shinzo Abe’s strategy to boost wages is gradually eroding consumer confidence, keeping private consumption subdued.

Japan Economic Growth

Economic growth will accelerate slightly this year. Frontloaded consumer spending ahead of the planned sales tax hike in October, coupled with solid investment—partially due to works related to the Tokyo 2020 Olympic Games and solid corporate earnings—will propel growth. However, risks are skewed to the downside, with rising trade protectionism and China’s slowdown leading the pack. Met the why particular panelists see the economy growing 0.9% in 2019, which is down 0.1 percentage points from last month’s forecast, and 0.6% in 2020.

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Japan Facts

Bond Yield-0.04-4.41 %Mar 20
Exchange Rate111.7-0.35 %Mar 20
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