Japan Economic Forecast

Japan Economic Outlook

July 24, 2018

Recent data corroborates that the anticipated recovery in Q2 was likely weaker than expected. Subdued wage growth continues to dent consumer confidence. Industrial production, furthermore, declined in May for the first time in four months. However, with a smaller-than-expected drop in industrial production and robust export growth in June, external demand appears to be fueling activity within Japanese factories. Leading indicators for Q3 signal that economic activity will remain relatively weak, mostly reflecting mounting global economic uncertainties. The Tankan survey for manufacturers showed a less positive assessment of the country’s economic outlook as trade barriers increase globally and geopolitical risks threaten to strengthen the yen. On the upside, the 2020 Tokyo Olympics is boosting capital expenditure, providing stimulus to the economy, while the new trade deal with the European Union should support the external sector.

Japan Economic Growth

Despite decelerating from 2017’s outstanding performance, the economy should continue to expand at a brisk pace this year, supported by the Bank of Japan’s (BoJ) ultra-loose monetary policy, a tightening labor market and construction projects related to the 2020 Tokyo Olympics. Rising protectionism globally and a sharp appreciation of the yen due to persistent geopolitical threats are the main downside risks to the outlook. Met the why particular panelists see the economy growing 1.1% in 2018, which is unchanged from last month’s forecast, and 1.0% in 2019.

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Japan Facts

Bond Yield0.11-4.41 %Aug 07
Exchange Rate111.4-0.35 %Aug 07
Stock Market22,6630.11 %Aug 07

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