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Japan Economic Outlook

Japan Economic Outlook

BoJ’s Yield Curve Control under threat

We expect Japan’s economic output to return to its pre-virus path by the end of the year. With the recovery from the pandemic complete, we expect GDP growth to slow from 2.7% this year to just 1.0% in 2024. The Bank of Japan won’t respond to inflation rising above its 2% target by raising short-term interest rates as soaring energy prices rather than stronger underlying price pressures are the main driver. However, there’s a growing risk that it will give up control over longer-term interest rates if it is forced to keep buying large amounts of bonds to defend its 10-year yield target.

30 March 2022

Japan Economic Outlook

BoJ still facing no inflation pressure

The Omicron surge will cause a renewed fall in consumer spending this quarter. But we still expect GDP to return to its pre-virus path in the second half of the year. And while Omicron and any subsequent outbreaks may exacerbate supply shortages, inflation will remain well below 2%, allowing the Bank of Japan to keep policy very loose.   Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

12 January 2022

Japan Economic Outlook

Conditions for strong recovery finally in place

With the Delta wave having ebbed and the majority of the population now fully vaccinated, we expect a strong rebound in domestic demand over the coming months. But the inflation concerns that hang over other major developed economies won’t materialise and the Bank of Japan will keep policy loose for the foreseeable future.

7 October 2021
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Japan Economic Outlook

Faster vaccine campaign allows rapid rebound

Japan’s lagging vaccine rollout has finally reached cruising speed, which should allow a rapid recovery in activity over the second half of the year. The labour market may soon be as tight as it was before the pandemic, but we expect this year’s jump in inflation to be short-lived. As such, the Bank of Japan will keep policy loose for the foreseeable future.

Japan Economic Outlook

Economy to regain full health faster than most expect

Japan’s vaccine rollout has got off to a crawling start and a fourth wave of coronavirus infections is forming. Even so, we expect vaccines to allow domestic spending to rebound fully in the second half of this year. Our forecast that GDP will rise 3.6% this year is well above the analyst consensus of +2.8%.

8 April 2021

Japan Economic Outlook

Vaccines to hasten recovery despite third virus wave

Japan is battling a third virus wave and is a laggard in the global vaccine rollout race. Even so, we expect economic activity to return to pre-virus levels in the second half of this year as vaccines become widely available. Our forecast that GDP growth will average 3.7% this year and 2.3% next year is well above the analyst consensus.

Japan Economic Outlook

Recovery could surprise to the upside

Japan’s success in containing the virus without imposing draconian restrictions on activity should enable a faster return to pre-virus levels of output than in many major economies. We expect GDP to rise by 3.5% next year, after this year’s 5.3% fall, and by 2% in 2022.

Japan Economic Outlook

Output set to remain below pre-virus level

Japan’s economic recovery has been threatened by a new wave of COVID-19 cases but the government probably won’t respond with drastic restrictions on activity. Output should therefore recover over the coming months, but social distancing measures and fears over infection will keep it below pre-virus levels. While underlying inflation should moderate, the Bank of Japan is unlikely to lower interest rates any further. The government has already introduced huge fiscal support to prevent bankruptcies and layoffs and it may provide additional measures to boost domestic demand over the coming months.

9 July 2020
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