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	<title>Japan's Medium-term Economic Outlook | The Daiwa Institute of Research</title>
		<link>https://www.dir.co.jp/english/research/report/joutlook/index.html</link>
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			<title>Japan Must Maintain Necessary Social Security Benefits while Stabilizing Social Insurance Rates</title>
			<link>https://www.dir.co.jp/english/research/report/joutlook/20250616_025160.html</link>
			<pubDate>Mon, 16 Jun 2025 15:00:00 +0900</pubDate>
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    ◆Under the status quo projection scenario, if the system remains unchanged, the social insurance rates will rise from 29.6% in FY2024 to 32.9% in FY2040 due to increases in medical and nursing care costs resulting from an aging population and advances in medical technology. In addition, the pension replacement rate will decline from 61.2% to 52.3% during the same period.

◆In order to maintain necessary social security benefits while stabilizing social insurance rates, it is essential to expand the social insurance contribution base and optimize benefit costs. According to our estimate, if radical reforms are implemented across all areas of pensions, medical care, and nursing care, it would be possible to stabilize social insurance contribution rates at a lower level than the current rate by FY2040, ranging from 25.6% (high-growth scenario) to 29.2% (status quo projection scenario), while allowing citizens to benefit from advancements in medical care and maintain the current level of pension benefits.

◆If such a roadmap can be presented, the future uncertainty of the working generation will be greatly reduced, household disposable income and consumption will increase, and a virtuous economic cycle will begin.

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			<title>Japan’s Medium-term Economic Outlook</title>
			<link>https://www.dir.co.jp/english/research/report/joutlook/20220210_022837.html</link>
			<pubDate>Thu, 10 Feb 2022 15:40:00 +0900</pubDate>
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    ◆The global economic growth rate for 2022-31 is expected to be +3.1% annualized. Early in the prediction period, the recovery process from the decline due to the spread of COVID-19 is expected to continue, leading to higher growth. However, the growth rate is expected to slow gradually as the reactionary phase peaks and the FRB in the U.S. and the ECB in Europe begin raising interest rates in the first half of the projection period. The global economic growth rate will converge to the potential growth rate in the second half of the projection period.

◆Japan's real GDP growth rate for FY2022-31 is expected to be +1.0% annualized. The first half of the forecast period is projected to grow by 1.2%, mainly due to the normalization of economic activity resulting from the infection being brought under control, as well as the accommodative fiscal and monetary policy. In the second half of the forecast period, the CPI inflation rate will generally exceed +1.0%, and the growth rate is expected to decline to +0.9% due to the acceleration of population decline in addition to the Bank of Japan's implementation of interest rate hikes. The national and local government's primary fiscal balance in FY2025 is expected to be -3.0% of GDP, and achieving the fiscal consolidation target is extremely severe.

◆In fiscal 2040, medical and nursing care benefit expenditures adjusted for CPI deflation are expected to increase by 1.3 times and 1.5 times, respectively, compared to FY2020. The medical and nursing care insurance premium burden ratio for households is expected to increase by 1.4 times. In order to realize social security system oriented to all generations, it is necessary to (1) simultaneously tackle economic growth and curtailment of benefits, (2) grasp the scale of required reforms through future estimates and reflect them in the list of reforms as appropriate, (3) strengthen the redistribution function of public finances (realization of push-type benefits), (4) promote measures to slow the declining birthrate with enhanced effectiveness through evidence-based policy-making (EBPM), and (5) secure stable financial resources.

◆The 6th Strategic Energy Plan set a target of raising the share of power generated by renewable energy to 36-38% in fiscal 2030. If this is achieved, it is estimated that Japan's GDP will expand by around 2.5 tril yen. Challenges that arise in the process of expanding the amount of power generated by renewable energy include rising electricity rates, substantial increases in capital investment, rising resource prices, and retirement costs.

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			<title>Japan’s Medium-term Economic Outlook (January 2021) (Summary)</title>
			<link>https://www.dir.co.jp/english/research/report/joutlook/20210121_022035.html</link>
			<pubDate>Thu, 21 Jan 2021 15:20:00 +0900</pubDate>
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    ◆We revised our medium-term outlook for Japan’s economy for the first time in approximately one year. In this report, we survey the global economy and Japan's economy and fiscal situation over the next ten years (2021-30), looking ahead to the post-corona era when the COVID-19 is no longer a threat to humankind. Furthermore, we will examine the economic significance and issues surrounding the goal to reach zero greenhouse gas emissions that Japan, the United States, Europe, and China are aiming for.

◆We expect the growth rate of the global economy over the next 10 years to be at an average annualized rate of 3.5% assuming that the COVID-19 vaccine is disseminated between the middle of 2021 and 2023. In the first half of the forecast period, the economy is expected to exhibit growth on the high side at +3.9% due to the rebound from the downturn caused by the coronavirus crisis, while in addition, fiscal and monetary policy, as well as the relaxation of US-China trade friction, will also play a supporting role. In the latter half of the period the growth rate is expected to return to 3.1%, about the level of the potential growth rate, with fiscal consolidation and the normalization of monetary policy.

◆Over the next ten years Japan’s real GDP growth rate is expected to be at an average annualized rate of 1.4%. As is the case of the global economic outlook, the first half of the forecast period is expected to be on the high side at +1.8%. Then during the second half it is expected to decline to 1.0% due to the suspension of monetary easing and the acceleration of Japan’s population decline. The effects of the coronavirus crisis on the potential growth rate are expected to be limited, with growth in investment especially promising in the areas of digitalization expected to speed up in the future, and environmentally friendly industries. At the same time, the fiscal situation is expected to see a major deterioration due to the rapid growth experienced in the expense of responding to the coronavirus crisis. The primary balance (PB) in FY2025 will be -3.5% as a proportion of GDP, and it will be extremely difficult to achieve the fiscal consolidation target.

◆The acceleration in global efforts towards becoming more environmentally friendly is not a temporary or short-term phenomenon. In fact, it should bring about fundamental structural changes in the mid to long-term. The "Green Growth Strategy" compiled in December 2020 is estimated to boost Japan's real GDP level by about 1.2% over the next 30 years. On the other hand, in the mid to long-term the marginal cost of reducing CO2 emissions is expected to grow, and hence there is a risk that the virtuous circle of the economy and the environment will cease to function. Carbon pricing, which the government will resume considering, will impact various industries differently, hence it will be necessary to keep abreast of the various arguments surrounding this question in the future.

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			<title>Japan’s Medium-term Economic Outlook</title>
			<link>https://www.dir.co.jp/english/research/report/joutlook/20200130_021302.html</link>
			<pubDate>Thu, 30 Jan 2020 18:00:00 +0900</pubDate>
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    ◆We revised our medium-term outlook for Japan’s economy for the first time in approximately one year. In this report, we survey Japan’s medium-term economy, taking into consideration the Abe administration’s growth strategy as well as fiscal and social security reforms, while at the same time focusing on prospects for the global supply chain in the era of the “New Cold War,” and providing an overview of the direction of the global economy in the medium-term.

◆We expect the growth rate of the Japanese economy over the next 10 years (FY2020-2029) to be at an annual average of 0.7% in real terms. In the first half of the forecast period, the economy is expected to grow mainly in the area of public demand due to measures to enhance social security and economic measures, but to slow down slightly in the second half due to an increase in population decline. In the latter half of the period when inflation is stable at 1%, the Bank of Japan's monetary policy will be revised, and interest rates are expected to rise. The average growth rate of the global economy is seen at 3.0% (CY2020-2029), and is expected to maintain a low level of growth throughout the period.

◆Expansion of the global value chain has had positive effects on the global economy and has helped emerging economies catch up with developed economies. China, which has continued to grow at a high level in its role as the "world’s factory," is aiming to increase the added value of its manufacturing industry. For Japan, this means that it is important to further improve the efficiency of its own global value chain and improve its technological capabilities through R&D in order to maintain competitiveness.

◆Since the inauguration of the second Abe administration in 2012, a total of seven growth strategies have been announced (one for each year). Assessing these growth strategies based on key performance indicators (KPI) whose goals were to be reached by the year 2020, we see that while those associated with overseas dealings and certain aspects of the labor market have been achieved, issues associated with the employment system, regulations, and productivity are seriously behind. Future goals for growth strategy beginning in 2020 are required to achieve policy effectiveness, prioritization and consistency, as well as to build economic and social systems tailored to the new “Society 5.0” era. 

◆The primary balance (PB) of central and local governments is expected to be at -3.0% of GDP in FY2025. It will be difficult to get PB back in the black by the same fiscal year. The All-Generation Social Security Review Council has shown a concrete direction of reform centering on the labor, pension, and medical fields. However, unless future benefits and burdens are forecasted, it will be impossible to establish a social security system that can ensure the peace of mind of all generations. Discussions should be made regarding the balance between self-help, social insurance premiums, and public expenditure to be aimed at, and the scale of reforms necessary for that purpose.

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			<title>Japan's Medium-term Economic Outlook - February 2015 -</title>
			<link>https://www.dir.co.jp/english/research/report/joutlook/20150320_009575.html</link>
			<pubDate>Fri, 20 Mar 2015 00:00:00 +0900</pubDate>
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◆We predict that Japan’s economy will grow an annualized 1.0% in real terms over the next 10 years (2015–24), with nominal growth of 1.2%. We expect a moderate growth rate in prices, but feel that it will be difficult to achieve the BOJ’s inflation target. We expect the quantitative monetary easing policy to continue, with short-term interest placed at zero.

◆We anticipate that the world economy will grow an annualized 3.3% over the next 10 years. The apparent direction of the advanced nations differs from country to country, but it is possible that the change in the Fed’s monetary policy will become increasingly influential. The collapse in the price of crude oil will effect individual countries and regions differently, but we expect this to be a factor providing upward pressure for the world economy overall.

◆Outlook for foreign exchange rates over the next 10 years. Differences in the US and Japan monetary policies are likely to bring further downward pressure on the already weak yen. However, in around 2018 the US is expected to take a breather from its monetary tightening policy, while Japan’s own monetary easing policy will likely have reached its technical limits by around the same time. As a result, the trend toward a weak yen will likely come to an end at that time.

◆As an upside risk, the end to deflation may come into view through the depreciation of the yen. There is a possibility that the vicious cycle of worsening international competitiveness, lower wages, and a stronger yen will be replaced by a virtuous cycle of improving international competitiveness, higher wages, and a weaker yen. However, it will be a race against time due to the technical limits of Japan’s monetary easing policy.

◆The goal of reducing the primary balance deficit as a percentage of nominal GDP by half from its FY10 level by FY15 is within range, but the target of achieving a primary balance surplus by FY20 will be difficult under the current fiscal system. Public debt as a percentage of nominal GDP is foreseen to continue its steady rise.

◆Practicing restraint in the area of expenditures is essential to fiscal reconstruction. It is especially important to keep steadily expanding social security costs under control. Reforms leading to a fiscal system that links costs and benefits and to political institutions that can eliminate conflicts of interest between the old and the young could also work as a revitalization policy promoting regional autonomy.]]></description>
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			<title>Japan's Medium-term Economic Outlook - August 2014 -</title>
			<link>https://www.dir.co.jp/english/research/report/joutlook/20140919_008959.html</link>
			<pubDate>Fri, 19 Sep 2014 00:00:00 +0900</pubDate>
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◆We predict that Japan’s economy will grow an annualized 1.5% in real terms over the next 10 years (2.3% nominal). Growth of 1.3% in the first half will accelerate to 1.6% in the second half. The main factor dragging down economic growth will be the impact of the consumption tax hike on personal consumption.

◆Wages will begin to rise as the supply-demand balance for labor tightens. However, increasing global competition will be a structural factor suppressing the growth of wages, and it is highly probable that the hollowing out of the domestic industry will progress further.

◆Achieving the stable 2% inflation target will prove be very difficult. During our forecast period, we believe the Bank of Japan will continue to maintain its accommodative monetary policy. With the easing extending over the long-term, the BOJ will find it difficult to execute an exit strategy.

◆Outlook for foreign exchange rates over the next 10 years. In the short to medium-term, the yen is likely to remain weak from the widening spread of interest rates between Japan and the US. In the long-term, however, the yen is likely to strengthen as per purchasing power parity.

◆Abe administration’s improves at B+. While significant progress has been made in agriculture-related reforms and in the expansion of mixed medical treatments, issues still remain in the area of employment. To lift Japan’s potential growth rate, further growth strategies are needed regarding employment and human resources.

◆In the growth strategies, hopes are being placed on the advancement of women and the use of foreign workers as new sources of labor. Even so, the elimination of the M-shaped curve of the labor force participation rate of women has only just begun. Employment practices require reform from top to bottom, such as the disparity in wages between men and women and the issues associated with regular and non-regular employment.]]></description>
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			<title>Japan's Medium-term Economic Outlook -February 2014-</title>
			<link>https://www.dir.co.jp/english/research/report/joutlook/20140401_008391.html</link>
			<pubDate>Tue, 01 Apr 2014 00:00:00 +0900</pubDate>
			<description><![CDATA[
◆World economy over next ten years. With steady growth seen for the U.S. economy, the main risk factor is change in financial policy on the part of the advanced nations during the period covered by this outlook. Maintenance of financial policy provides the foundation for this outlook, and any changes could have a major impact on the economies of emerging nations. Factors which have inhibited equipment investment up to now (such as the decline in prospective profit and the increase in uncertainty) are gradually being removed, and we believe that it can be deduced that the global economy has now entered the expansionary phase of the business cycle.

◆Japan’s economy over the next ten years. The outlook for Japan’s real economic growth rate over the next ten years is an annual average of 1.5%. However, the pattern of said growth is expected to be different in the first and second halves of this period. While a growth rate of 1.7% is seen for the first half of the ten-year period, changes in government monetary policy are expected to erode the effects of the weak yen, causing growth to slow somewhat to 1.3% in the second half. Implementation of an effective growth strategy is essential to maintaining growth in the second half the period. The synergy effect of the 2020 Tokyo Olympics is much-anticipated.

◆BOJ will continue monetary easing. The decline in interest rates and the weak yen are expected to push the Japanese domestic economy up, but this is only a short-term, limited effect. The inflation target cannot be achieved through monetary policy alone. This must be combined with a growth strategy to become more effective.]]></description>
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			<title>Japan's Medium-term Economic Outlook -February 2013-</title>
			<link>https://www.dir.co.jp/english/research/report/joutlook/20130313_006788.html</link>
			<pubDate>Wed, 13 Mar 2013 00:00:00 +0900</pubDate>
			<description><![CDATA[
◆We have revised our July 2012 medium-term outlook for Japan’s economy. The biggest change in the past half year has been the debut of the Abe administration which is promoting a so-called “Abenomics” agenda, consisting of such policies as bold monetary easing, flexible fiscal expenditures, and growth strategies. Whether these policies will prove effective, however, will greatly depend on the direction of the world economy. For our current outlook, we assumed a more conservative view of the world economy. As a result, we now forecast that Japan’s economy will increase 1.5% (real) and 2.1% (nominal) over the next 10 years (annualized average rates).

◆While the Bank of Japan (BOJ) has adopted a “price stability target”, this does not necessarily mean a change in its monetary policy framework. Since the price stability target is not the ultimate goal, the key issue will be how the government and the BOJ will work together to achieve it. If structural factors relating to deflation are examined in terms of unit labor cost, to put an end to deflation it will be essential that companies strengthen their profit foundations in the context of easy monetary policy and that a safety net enabling the smooth rehabilitation of companies and the reemployment of workers is established. The yen depreciating against the dollar does little in the short term to increase prices. Even if depreciation continues over the long term, a good amount of time will be needed before prices start to rise. What should be done is to view a weaker yen as an opportunity for revising regulations and promoting institutional reform. In the process, medium- to long-term growth capacity rather than the shortterm growth rate should be emphasized.

◆Higher energy prices, such as for electricity, will risk becoming a major impediment for the growth of Japan’s economy if they are left unaddressed. However, the government designing appropriate energy policies using the price mechanism can be expected to provide corporate incentives to link the issue of energy efficiency and diversification with economic growth.]]></description>
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			<title>Japan's Medium-term Economic Outlook -July 2012-</title>
			<link>https://www.dir.co.jp/english/research/report/joutlook/12082101mloutlook.html</link>
			<pubDate>Tue, 21 Aug 2012 00:00:00 +0900</pubDate>
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◆We have revised our January 2012 medium-term outlook for Japan’s economy. In the last half year, the European sovereign debt crisis and the slowing of emerging economies have increased uncertainties bearing on the world economy. In our current forecast, we adopted a more conservative view of the world economy and assumed more restrained growth of social insurance benefits reflecting the growing need to rebuild government finances. As a result, we now forecast that Japan’s economy will increase 1.4% (real) and 1.9% (nominal) over the next 10 years (annualized average rates).

◆Whether the advance of manufacturing industries overseas will cause domestic economic activity to contract will depend on the magnitude of substitution and scale effects. Companies moving operations abroad does not necessarily result in the hollowing out of the economy. A quantitative analysis has revealed a relationship where an accelerated shift to offshore production by the chemical, iron/nonferrous metal/other metal, and electrical machinery industries gives rise to higher exports from Japan.

◆Turning to the effect of age and age cohorts, keywords for consumption in a hyper-aged society will be “home-oriented/leisure”, “maintenance”, and “safety/security”. In terms of growth strategies, since diverse human resources and the reeducation of workers will be necessary in the years to come, the provision of goods and services that lessen household duties will be required.

◆When viewed in the long term, the unemployment rate is experiencing a secular rise through the downward rigidity of nominal wages and increase in the ratio of non-regular to overall employees. An examination of the consumption structure by employment category discloses that the ascent of the proportion of non-regular employees has increased demand for necessities and reduced that for non-essential and non-urgent goods.]]></description>
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			<title>Japan's Medium-term Economic Outlook -January 2012-</title>
			<link>https://www.dir.co.jp/english/research/report/joutlook/12021401mloutlook.html</link>
			<pubDate>Tue, 14 Feb 2012 00:00:00 +0900</pubDate>
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◆We have revised our June 2011 medium-term outlook for Japan's economy. After downgrading the growth rate of the world economy and factoring in the government’s reconstruction policies and draft proposal for the integrated reform of the social security and tax systems, we now forecast that Japan's economy will grow 2.4% (nominal) and 1.8% (real) over the next 10 years (annualized average trend rates).

◆Rather than actual level, what has become problematic with respect to currency rates is the fluctuation that far exceeds changes in economic fundamentals. Excessive fluctuation in market exchange rates not only directly worsens Japan's economy but also has the indirect but still major adverse effect of restraining the growth of nominal wages as companies seek to maintain export competitiveness. To roll back the overly strong yen, measures that take a long-term view are needed. Specific steps that could be taken are rules to control excessive fluctuation accompanying a floating exchange rate system and Japan's manufacturers endeavoring to make products whose selling prices do not fall and developing sales methods where price reductions are not necessary.

◆Electricity shortages resulting from the halt of nuclear power plants have mainly been met by curbing the demand of large-volume electricity users and by increasing the operating rate of thermal power plants. Such measures, however, have been accompanied by subdued corporate activity and upward pressure on electricity prices. To mitigate these effects, it will be necessary to implement comprehensive measures, including restarting nuclear power plants that have met high safety standards, further reducing household demand for electricity through market mechanisms and smart grids, and establishing reasonable and highly transparent purchase prices for electricity generated through renewable energy sources.

◆As the fiscal problems of governments deepen worldwide, it is very significant that a proposal has been drafted for the integrated reform of the social security and tax systems, which includes a specific plan for increasing the consumption tax. While we can agree with the philosophy behind the draft proposal, cuts to existing benefits are inadequate, and the examination of many issues has simply been postponed to the future. Whether conditions for raising the consumption tax rate will actually fall into place is a prospect that will bear watching.]]></description>
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