Japanese Economy: Analysis and Forecasts, No.129

Finding the balance between ensuring economic recovery and containing the second wave of Covid-19: toward a trial-and-error solution

▶ Japan’s Q2 real GDP contracted an annualized -27.8% QoQ. The determinants of GDP decline in Q2 were different from Q1. Download the full report for details.

▶ We have updated our forecast for real GDP growth to -5.9% in FY 2020, and +3.3% in FY 2021. Although the current economic cycle seems to have reached a trough in May, economic recovery is likely to be slow.

▶ We forecast a core CPI inflation of -0.3% in FY 2020, and +0.4% in FY 2021. Although the decline in energy prices has decelerated, the government’s free childcare program and the partial to complete elimination of tertiary education fees will both put downward pressure on inflation.