In our baseline scenario, the hit to Japan’s economy from the energy shock will be limited as energy import prices won’t rise nearly as much as in 2022 and the government is once again capping prices of petroleum products. Granted, the household savings rate is now much lower than it was at the start of 2022, when the economy expanded at an above-trend pace. But wage growth is now much stronger so real household incomes probably won’t fall much if at all.
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