Japan's Economy: Monthly Outlook (Sep 2017)

◆In light of the 2nd preliminary Apr-Jun 2017 GDP release we have revised our economic growth outlook. We now forecast real GDP growth of +1.7% in comparison with the previous year for FY17 (+1.9% in the previous forecast), +1.3% in comparison with the previous year for FY18 (+1.2% in the previous forecast). Overseas demand centering on exports to the US is expected to mark time temporarily, but Japan’s economy is expected to continue growth led by domestic demand in the future due to the following factors: (1) growth in consumption due to improved employment environment, and (2) investment in improving productivity.

◆The global economy and Japanese exports have maintained favorable results up to now due to support from factors associated with the short-term economic cycle, including (1) inventories, centering on the US, have recently recovered and have moved into the inventory accumulation phase, (2) expansionary fiscal policy has come into effect centering on the EU (the pace of austerity policy has slowed), and (3) acceleration of the Chinese economy ahead of the meeting of the National Congress of the Communist Party this fall. However, the possibility that these factors may begin to lose their influence in 2018 and beyond is unavoidable.

◆In this report we examine global economic cycles using a diagram of the capital stock cycle. This is done from the viewpoint of the capital investment cycle, which indicates the mid to long-term economic cycle. The results of this analysis tell us that the overall global economic cycle may quite possibly be approaching maturation. This is based on the fact that the US economy is in a maturation phase, while the Chinese economy is in an adjustment phase, and the EU economy still has room for growth.