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"I didn't expect this again in 4 years..." Japan on high alert due to shocking forecast

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Korea Economic Daily
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  • According to 10 economists, last year, the Japanese economy recorded negative growth with a real GDP decrease of 0.2%.
  • The suspension of automobile production and inflation-induced reduced consumer spending were analyzed as major factors for the low growth.
  • This year, real GDP is expected to increase by 1.2%, but the possibility of reduced consumption due to rising food prices remains.
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  • The article was summarized using an artificial intelligence-based language model.
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"Negative growth for the first time in 4 years"... Plummeting Japanese economy

Forecast by 10 economists

"Real GDP decreases by 0.2%"

Inflation leads to reduced consumer spending

Last year, the Japanese economy was observed to have experienced negative growth for the first time in four years. Analysts attribute the decline in growth rate to the suspension of automobile production and weak consumer spending due to rising prices in the first half of last year.

According to the Nihon Keizai Shimbun, the average forecast for Japan's real Gross Domestic Product (GDP) last year by 10 private economists was a 0.2% decrease compared to the previous year. The forecast range varied from a 0.1% decrease to a 0.2% decrease, with all 10 economists predicting negative growth.

Consumer spending was observed to have decreased by 0.6%. The suspension of production by Daihatsu Motor due to quality certification fraud significantly impacted sales from January to March. In the latter half of last year, the sharp rise in prices of rice and fresh produce further dampened consumption.

External demand is also weak. The contribution of external demand was analyzed to have decreased by 0.2 points compared to the previous year. Saikawa Saesuke, an economist at Mizuho Research & Technologies, pointed out, "Exports of automobiles and machinery were sluggish," and noted that "Japan is relatively lagging as China exports cheap products or strengthens internalization."

Capital investment was observed to have increased by 1.4%, but it fell short of the 1.5% increase in 2023. Jun Takeda, an economist at Itochu Research Institute, stated, "Construction orders are solid, but there are cases where projects are delayed due to labor shortages caused by responses to labor regulations."

This year, Japan's real GDP growth rate is expected to turn positive. The average forecast by economists is a 1.2% increase compared to the previous year. Consumer spending is also expected to increase by 0.9%. However, there is also an analysis that "the risk remains high that household perceived real wages will not rise due to the sharp increase in food prices, causing consumption to stall (Miyajima Takayuki, an economist at Sony Financial Group)."

The trends of the Donald Trump administration in the United States are also noteworthy. According to a survey of economists by the Nihon Keizai Research Center, 66.7% responded that the Trump administration would 'lower' Japan's growth rate, while only 9.1% said it would 'increase' it.

Yoshitaka Shinka, an economist at Dai-ichi Life Research Institute, pointed out, "As the predictability of policies decreases, the sense of uncertainty about the future has increased," and expressed concern that "it has become easier for companies to refrain from investing and take action." Ryomaru Kumagai, an economist at Yamato Research Institute, explained, "There is a possibility that the Japanese economy will decline due to a decrease in exports caused by the deterioration of the U.S. economy and the strengthening of economic security."

Tokyo correspondent: Il-kyu Kim

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