Japan’s Economy: Monthly Outlook (Feb 2023)

Economic outlook revised; BOJ likely to continue easing for some time even under new leadership

  • Keiji Kanda
  • Wakaba Kobayashi
  • Shotaro Kugo
  • Kazuma Kishikawa
  • Kanako Nakamura


◆In light of the announcement of the Oct-Dec 2022 GDP 1st preliminary results, we have revised our economic outlook. We now see growth in Japan’s real GDP at +1.4% in FY2022, with FY2023 at +1.6%, and FY2024 at +1.0% (on a calendar year basis we expect +1.8% in 2023 and +1.1% in 2024). We expect growth to be on the high side centering on FY2023 despite the economic slowdown in the US and Europe, with underlying support from the normalization of economic activity and accommodative fiscal and monetary policies. However, caution is required as risks are piling up centering on overseas economies, such as the US, expected to enter a serious recession.

◆The growth rate for Japan’s Consumer Price Index on an aggregate basis excluding fresh food (core CPI) is expected to be +2.9% in FY2022, +1.8% in FY2023, and +1.4% in FY2024. The Bank of Japan is expected to maintain the current framework of monetary easing measures until the US economy bottoms out or the trend in wage increases in Japan becomes clearer after the spring wage negotiations. However, there is a possibility that under the new governor, the Bank will undertake "inspections" and revisions to the joint statement with the government, and begin a review of yield curve control, gradually moving to short-term interest rate operations. But even if that is the case, monetary easing itself will continue, including continued purchases of government bonds, maintenance of low interest rates, and forward guidance.

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