Japan GDP growth will recover and inflation will fall

Significance

Japan's GDP growth rate for 2022 was announced the same day: 1.1%. The economy has not yet regained its 2017 output because of large pandemic-related losses and a consumption tax hike in 2019. The economy-wide price index jumped 4.4% (annualised), among the largest increases in 30 years besides those driven by tax hikes.

Impacts

• Inflation will fall in the coming months, such that the current BoJ policy will once again become consistent with actuality.
• Monetary policy adjustment could be warranted in 2024 if businesses raise wages in the approaching negotiations, as the government urges.
• Recent falls in inventories will likely have a positive effect on future growth as producers and sellers build back their stocks.