Japan Economic Forecast

Japan Economic Outlook

October 23, 2018

Available data points to a softening of growth momentum in the third quarter, after the economy rebounded in Q2 on the back of a surge in fixed investment. Although strong corporate earnings likely continued to buttress investment growth, business confidence—though still positive—deteriorated for the third consecutive quarter in Q3. Moreover, the average manufacturing PMI reading over Q3 worsened compared to Q2. Aside from confirming weaker business confidence, the September PMI also indicated deteriorating foreign demand conditions, with export orders sliding in the month. The external sector’s contribution to growth in the quarter was likely subdued, as higher oil prices weighed on the trade balance—which posted a deficit in July and August. Finally, private consumption was likely feeble in Q3 as wage growth remained subdued as of August.

Japan Economic Growth

Economic growth will remain broadly stable next year, propelled by stronger domestic demand. A tight labor market should translate into higher wage growth, while investment will benefit from the 2020 Tokyo Olympics. A deteriorating trade outlook, slowing global growth and a scheduled sales tax hike in October are the main downside risks. Met the why particular panelists see the economy growing 1.1% in 2019, which is unchanged from last month’s forecast, and 0.6% in 2020.

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Japan Facts

ValueChangeDate
Bond Yield0.11-4.41 %Nov 15
Exchange Rate113.6-0.35 %Nov 15
Stock Market21,8040.11 %Nov 15

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