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Outlook for Japan’s Economy in 2021

Outlook for 2021: Growth of more than +2% expected, but may fluctuate significantly depending on infection situation

Keiji Kanda

Akane Yamaguchi


◆We expect Japan’s real GDP growth rate in 2021 to be at +2.3%. Working under the assumption that measures to prevent the spread of COVID-19 infections will be continued both in Japan and abroad, we expect recovery from the previous year’s downturn (estimated at -5.3%) will likely be gradual. Looking at the outlook by demand component, personal consumption and exports are expected to achieve positive growth, but the amount of expected growth will still not make up for the extent of the previous year’s decline. While capital expenditure and housing investment are expected to suffer slight declines, public demand is expected to continue its positive growth.

◆There are five major factors providing a boost to economic recovery in 2021. These are (1) maintenance of accommodative fiscal and monetary policies, (2) improvement in global IT market conditions, (3) inauguration of Biden administration in the US, (4) progress in inventory adjustment, and (5) holding of the Tokyo Olympics and Paralympics.

◆The economy may fluctuate significantly depending on the infection situation. In addition to our main scenario, which sees a gradual recovery for the economy, we also provide a vaccine dissemination scenario, which assumes that effective vaccines will spread rapidly from the latter half of 2021, and a risk scenario, which assumes that spread of COVID-19 infections will occur twice during 2021 in Japan, the US, and Europe. According to the vaccine dissemination scenario, the real GDP growth rate for 2021 will rise to +2.9%, with the 2022 growth rate expected to exceed 4%. On the other hand, the risk scenario sees GDP deteriorating to as much as -0.4%, with two consecutive years of negative growth expected.

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