Japanese Economy Monthly Forecast (March 2020)

Data updates

▶ Although production increased for the third consecutive month in February, its recovery from the October-November slump has been sluggish.
▶ Spending on goods (40% of total private final consumption expenditure) increased in February. However, statistics on spending on services, which have more weight and might have been affected substantially by Covid-19, have not been released yet, making it hard to draw conclusions on private consumption trends.
▶ Private housing, private capital investment and changes in private inventories were all bearish in 2020 Q1.
▶ February imports were hit particularly hard by Covid-19. That caused an abrupt expansion in net exports, which propped up GDP growth. However, as the global economy entered a synchronized slowdown in March, we expect that exports will decline, which will worsen the trade balance.

2020 Q1 Forecasts
▶ Our forecast for 2020 Q1 real GDP growth is an annualized -0.2% QoQ.
▶ However, real total demand growth (i.e. domestic demand plus imports) is an annualized -4.8%.
▶ We forecast an overall GDP deflator of -0.1% QoQ in 2020 Q1.