Japan outlook – Recovery appears set to continue
- Japan’s economy looks set to remain robust – we forecast GDP growth of 1.6%, 1.7% and 1.3% in 2022, 2023 and 2024 respectively
- Wage pressures are rising and evidence of firms passing on cost increases are growing
- We expect the BoJ to remain on hold in 2023, but positive shifts in pricing norms could see yield curve control adjusted in 2024
- The next BoJ Governor expected in April 2023 could signal a shift in approach.
Recovery set to continue
The recovery of the Japanese economy looks set to continue. Growth should be supported by the delayed reopening of the economy from COVID-19 and a recovery in tourism, with the borders of the country now fully open to overseas visitors. The positive growth momentum will be tempered by slowing external demand – we expect recession in Europe and the US and below-trend growth in China in 2023. In 2024 we expect Japan to continue catching up to its pre-pandemic trend (Exhibit 10). We forecast GDP growth of 1.6%, 1.7% and 1.3% in 2022, 2023 and 2024 respectively (consensus 1.5%, 1.3% and 1.1%).