Japan’s Economy: Monthly Outlook (Nov 2022)

◆In light of the announcement of the Jul-Sep 2022 GDP 1st preliminary results, we have revised our economic outlook. We now see growth in Japan’s real GDP at +2.2% in FY2022, with FY2023 at +1.6%. We expect a recovery in domestic consumption, including inbound consumption by foreign tourists visiting Japan, as well as recovery production in motor vehicles as a result of the resolution of the shortage in semiconductors. We expect positive growth to continue despite the slowdown in the global economy with accommodative fiscal and monetary policies providing underlying support for the economy. Domestic inflation retains a strong cost push factor, but if a major increase in wages becomes manifest in the spring 2023 wage negotiations, discussions regarding an exit strategy from the current monetary policy will likely become active.

◆The government’s Comprehensive Economic Measures are expected to boost real GDP by around 7.0 tril yen. Regarding the effects of the measures to prevent high energy costs, which are the centerpiece of the project, the standard household indicated by the government is not the average household on a macro scale, and the actual burden reduction for many households may be less than that of the standard household. Japan’s challenge as an energy importing nation is to reduce the volume of its use of fossil fuels. Household savings have accumulated significantly since the spread of COVID-19, a phenomenon which is especially prominent amongst high income households. In addition, considering the fact that corporate business results are favorable in most industries, efforts to lighten the burden should be focused on low income households and some corporations.