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Japan's Economy: Monthly Outlook (Sep 2020)

Gradual economic recovery continues; hopes and challenges for Suganomics

Keiji Kanda

Akane Yamaguchi

Kazuma Kishikawa


◆Japan’s economy has been in a gradual recovery trend ever since hitting bottom in May when the state of emergency was lifted. The recent increase in the number of persons newly infected with COVID-19 has not necessarily led to a decrease in people going out, and it is our opinion that the economy’s resistance to the effects of COVID-19 is increasing both in the domestic and overseas markets.

◆Looking at recent trends in the economy, we see that exports have grown for three consecutive months since June, while recovery in personal consumption has ceased since July. Considering trends in consumer turn-out and industrial statistics, as well as information from individual corporations, there appears to have been a slight decline occurring from August through early September. The real GDP growth rate in the Jul-Sep period is expected to achieve double-digit growth not only in Japan but in the US and Europe as well. While there is of course the tendency for the Jul-Sep period growth rate to be high in those countries where the decline in GDP during the Apr-Jun period was especially steep, the level of Jul-Sep period GDP is expected to fall around 4-5% below Jan-Mar period figures in Japan, the US, and Europe.

◆The new Yoshihide Suga Cabinet was inaugurated on September 16. An overview of the efforts of the former cabinet shows that while positive changes have been seen in the financial markets, employment, and the apprehension of external demand, the strengthening of growth potential and social security reforms have not progressed as much as intended by original targets. The way to fiscal consolidation ultimately eluded the former administration. The immediate task for the Suga Cabinet is to respond to the coronavirus crisis and balance socio-economic activities with prevention of infection. At the same time, however, for Japan, where the population is declining and aging, strengthening growth potential is also an urgent issue. While enhancing the effectiveness of existing growth strategy, the new administration is expected to make use of the coronavirus crisis as an opportunity to promote a "digital society" and the "dynamic engagement of all citizens."

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