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Risk Factors Facing Japan's Economy(Jan 2015)

Japan’s economy expected to move toward recovery, but care should be taken regarding four risk factors

Mitsumaru Kumagai

Satoshi Osanai

Masahiko Hashimoto

Shotaro Kugo

Hiroyuki Nagai

Summary

Main economic scenario for Japan: Japan’s economy is now seen as having entered a period of decline since having peaked in January 2014. However, there is a good possibility that this will have been short-term. We expect Japan’s economy to gradually recover in 2015 due to the following factors: (1) Continuation of the virtuous circle brought on by Abenomics, and (2) The gradual firming up of exports centering on the US, leading to a moderate recovery trend. (For further detail see “Japan’s Economic Outlook No. 183 Update (Summary)” by Mitsumaru Kumagai, Dec. 12, 2014).


BOJ’s monetary policy: Our current outlook is that it will be difficult for the BOJ to reach its target growth rate in consumer price of 2% by the original deadline.


Four risk factors facing Japan’s economy: In this report we examine risk factors facing Japan’s economy. Risk factors for the Japanese economy are: (1) The Triple Weaknesses – a weak bond market, weak yen, and weak stock market stemming from the postponement of the additional consumption tax hike, (2) China’s shadow banking problem, (3) tumult in the economies of emerging nations in response to the US exit strategy, and (4) a worldwide decline in stock values due to geopolitical risk.

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