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Economic 'escape velocity' hinges on Japan's consumers

Tuesday, March 10, 2015

Significance

The Japanese economy seems unable to get up to cruising speed. One impediment after another has caused growth to lag expectations. The most recent indicators suggest that next quarter will witness solid growth. However, there have been false starts many times before, with promising signs followed by disappointing performance.

Impacts

  • Prices are unlikely to meet the BoJ's inflation target, but neither are they likely to fall back into deflation.
  • Cheaper imported energy will boost the economy, but this will occur over many months.
  • The labour market is likely to tighten.
  • Japan's exports will withstand the economic slowdown in China, boosted by the yen depreciation.
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