Japan’s Economy: Monthly Outlook (Nov 2023)

Economic outlook revised; moderate recovery seen, with inflation expected to take hold

  • Keiji Kanda
  • Shotaro Kugo
  • Munehisa Tamura
  • Kazuma Kishikawa
  • Kanako Nakamura


◆In light of the announcement of the Jul-Sep 2023 GDP 1st preliminary results, we have revised our economic outlook. We now see growth in Japan’s real GDP according to our main scenario at +1.7% in FY2023, and +1.3% in FY2024 (on a calendar year basis we expect +1.8% in 2023 and +1.5% in 2024).

◆The real GDP growth rate for FY2024, excluding the carryover from the previous year, is expected to be +0.7% y/y, with a moderate economic recovery due in part to economic normalization having run its course. The economy is expected to be supported by the silicon cycle's recovery phase and the government's economic stimulus measures. The consumer price index of all items, less fresh food (core CPI), is expected to rise by 2.8% y/y in FY2023 and by 2.8% y/y in FY2024. The price outlook has been raised from the previous forecast, taking into account further progress in price pass-through and other factors.

◆We assume that the Bank of Japan (BOJ) will eliminate its long- and short-term interest rate operations (yield curve control; YCC) and lift its negative interest rate policy at its April 2024 monetary policy meeting, when the rate of wage increases in the 2024 spring wage negotiations are known to some extent. The BOJ will move to a zero-interest-rate policy, and the accommodative monetary environment will be maintained for the time being. Thereafter, we expect the BOJ to gradually reduce the degree of easing (assuming an 0.25% rate hike in Oct-Dec 2024), while closely monitoring economic and price conditions.

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