Recession appears baked in, fresh stimulus on the way

Consumer spending has rebounded from the slump caused by October’s sales tax hike and we’ve pencilled in a rise in the first quarter. But the coronavirus is likely to result in a renewed slowdown over the coming months as people self-isolate by avoiding public spaces. Indeed, we now expect Japan’s GDP to contract by 1% in 2020. Central banks elsewhere have already eased monetary policy aggressively and we suspect that the Bank of Japan will follow them with a cut to its short-term policy rate over the next few weeks.