Japan: Bumpy road ahead – ANZ

In view of ANZ analysts, for the Japanese economy, demand has been remarkably resilient in despite the weaker global economy.

Key Quotes

“Another record fiscal budget and the Olympics should keep the economy growing in 2020. In 2021, the economy will have to find support abroad to keep growing. We expect GDP growth to decline from 1.0% in 2019 to 0.5% in 2020 and 2021.”

“The VAT hike poses an immediate risk to domestic demand. A supplementary fiscal budget for the reconstruction from typhoon Hagibis should take the edge off, though.”

“Looking a little further ahead, escalation of the global trade war is the key risk for Japan, as it hits the economy in two ways: on declining demand for Japanese goods and a deterioration of competitiveness on the back of yen appreciation.”

“We expect further easing of economic policy will come from the fiscal side, whereas the Bank of Japan will keep its policy largely unchanged through 2020 and 2021 and stick to fine-tuning.”