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Japan's Economy: Monthly Outlook (Aug 2020)

Economic outlook revised; plodding toward recovery with COVID-19

Keiji Kanda

Akane Yamaguchi

Yutaro Suzuki

Wakaba Kobayashi


◆In light of the 1st preliminary Apr-Jun 2020 GDP release, we have revised our outlook for the Japanese economy. We now expect Japan’s real GDP to decline by -6.0% in FY2020, with growth of +3.4% seen in FY2021. If a serious outbreak of COVID-19 recurs in the US, Japan and Europe, leading to the reissue a state of emergency in Japan and the unavoidable repeat of lockdown orders, the FY2020 real GDP growth rate could be expected to deteriorate, falling as low as -9.3%. There is a danger that this could cause a sharp increase in the number of corporate bankruptcies, ultimately developing into a financial crisis.

◆The outlook for the real GDP growth rate in the Jul-Sep period is +13.0% q/q annualized. However, this merely manages to make up for around 40% of the decline in GDP during the Apr-Jun period, which recorded the steepest decline of the entire postwar period. Japan’s economy is plodding toward recovery. The pace of recovery during the Oct-Dec period and beyond is expected to remain moderate. As for personal consumption, while goods are expected to continue their trend toward recovery, consumption of services involving face-to-face contact or commuting and travel will remain sluggish for some time to come due to concerns regarding infection. Meanwhile, as for exports, those destined for China maintain a steady undertone, while exports of capital goods to the US and Europe, such as general machinery, are expected to be weighed down by declining factory operating rates.

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