The International Monetary Fund (IMF) on Tuesday cut its forecast for Japan’s economic growth this year partly due to reoccurring stoppages in auto manufacturing and low private investment in Q1.
But on consumption the IMF is sanguine for the moment, expecting pay increases from this year’s “shunto” negotiations to significantly increase household cash which is the key to demand.
IMF said that in Japan, the solid shunto wage increase will aid the recovery in private consumption beginning in the second half as it was noted in the update to the WEO report.
The IMF has revised down this year’s growth for Japan to 0.7 percent from its prior estimate of 0.9 percent in April; 2023 expansion is expected to be 1.9 percent. It has kept the forecast of 1.0 % for the year 2025 entirely unchanged.
Warnings have been given that the recent slackness of consumption makes it possible for the BOJ to leave the interest rate from its current near-zero inapt until it desires.
Recent BOJ’s Governor, Kazuo Ueda has stated this in an interview where he mentioned that the consumption prospect was optimistic because wages are gradually rising across the sectors and improving the power of household consumption.
Reuters said sources close to the BOJ reported that the current check on inflation suggested that, although the bank is likely to reduce the economic growth estimated it made this year in July, it still expects inflation to stand at 2% in the coming years hence leaving the door open for a possible interest rate hike this month.
Japan’s GDP shrank 2.9% in January – March on an annualized basis due to problems with auto production and concerns over consumption, partly caused by inflation. Most of the analysts pointed to a view that the expansion returned in the April–June quarter as production cuts in the auto industry decreased.