Research Briefing | Nov 21, 2022

Why we forecast Japan’s resilient growth in 2023

Japan: Why we forecast resilient growth in 2023

We expect the Japanese economy to grow at 0.9% y/y in 2023, after 1.6% growth in 2022. Four reasons why we project the relatively resilient growth compared to other advanced economies: pent-up demand, the key auto industry recovery, supportive policy, and a strong base effect.

What you will learn:

  • Firstly, economic reopening has lagged behind the US and Europe, implying that some of the emerging pent-up demand will carry over to early 2023. 
  • Secondly, Japan’s key auto industry looks poised for recovery, as supply chain disruptions finally subside. Easing supply constraints will encourage auto makers to enhance production to fulfil existing backlogs.
  • Thirdly, both monetary and fiscal policy will remain supportive. We expect interest rates and financial conditions to stay extremely accommodative.
  • Lastly, and technically, the strong base effect from a robust recovery in H2 2022 is also contributing to push up average GDP growth for 2023, which appears superficially stronger than q/q growth momentum.
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