Japanese Economy: Analysis and Forecasts, No. 124

Highlight: Global trade has bottomed out, but recovery remains uncertain

▶ Japan’s Q3 real GDP growth was an annualized +0.2% QoQ, well below expectations. APIR’s latest forecast for real GDP growth is +0.7% in FY2019, +0.4% in FY2020, and +0.7% in FY2021.

▶ Rush demand before the consumption tax hike this time was not as pronounced as in 2014. Although private consumption remains weak, we deem an economic recession in FY2019 is unlikely.

▶ The China-US trade conflict is taking its toll on global trade. As the effects of protectionist policies will extend into FY2020, the Japanese economy is not expected to get back on the path to recovery until FY2021.

▶ Future inflation will be influenced not only by energy and non-energy prices, but also by the consumption tax hike and the elimination of child care fees. We forecast a core CPI inflation of +0.6% in FY2019, +0.4% in FY2020, and +0.5% in FY2021.