Japan Economic Forecast

Japan Economic Outlook

December 20, 2018

The economy fared worse than initially reported in the third quarter as strong typhoons and a powerful earthquake severely disrupted economic activity. The economy is, however, expected to return to growth in the fourth quarter as supply chains recover from the natural disasters. The manufacturing PMI averaged slightly higher in Q4 than in Q3, while confidence among large manufacturing firms steadied at relatively high levels in the same period. Moreover, the Tankan survey—an economic survey of Japanese businesses conducted by the Bank of Japan (BoJ)—showed that large firms are planning to noticeably increase capital spending in the fiscal year ending in March 2019. On 14 December, the government unveiled a tax reform package for FY 2019 aimed at alleviating the negative consequences of a consumption tax hike scheduled for October 2019. Four days later, the government presented the budget for FY 2019, which will top JPY 100 trillion (USD 890 billion) for the first time, highlighting the government’s difficulties to rein in public spending

Japan Economic Growth

Fundamentals should remain robust next year thanks to ultra-loose monetary policy, a tight labor market and construction works related to the 2020 Tokyo Olympics. A scheduled tax hike and rising trade protectionism will weigh on growth, however. FocusEconomics panelists see the economy growing 1.0% 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 Yield0.01-4.41 %Jan 16
Exchange Rate109.1-0.35 %Jan 16
Stock Market20,4430.40 %Jan 16

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