Limited demand boost from cheaper oil

The plunge in crude oil prices since last summer will reduce the cost of Japan’s energy imports by around 2.5% of GDP in the near term. However, much of the windfall will be saved and the boost to demand over the course of the year will be much smaller – perhaps just 0.5% of GDP. While energy price falls skew the risks to our GDP growth forecast for this year to the upside, we still think that growth will be much weaker than most expect.