Japan's Economic Outlook for FY 2020–2022

Economic Research Department Executive Research Fellow Taro Saito

■Summary

<Real GDP growth rate: FY 2020 – 5.2%, FY 2021 +3.4%, FY 2022 +1.7%>

Real GDP in the July–September quarter of 2020 grew at an annualized rate of 21.4%, reflecting a sharp increase in private consumption following the lifting of the declaration of a state of emergency, but recovered just under 60% of the decline in the April–June quarter, which saw record negative growth. The normalization of economic activities has been delayed.
Although overall consumption is picking up, spending on face-to-face services such as dining out, accommodations and entertainment fell to extremely low levels under the declaration of the state of emergency. The return is also weak.
Growth that exceeds potential growth rate is expected to continue beyond the October–December quarter. If the declaration of a state of emergency is reissued in response to the spread of the novel coronavirus, economic growth will be negative again and a slowdown in the economy will be unavoidable.
The real GDP growth rate is forecast to be minus 5.2% in FY 2020, 3.4% in FY 2021 and 1.7% in FY 2022. It will take time for the level of economic activity to return to pre-Corona levels, as securing social distance will continue to curb the consumption of face-to-face services. Real GDP levels will recover to pre-Corona levels (October–December quarter of 2019) in the July–September quarter of 2022. The economy will return to its most recent peak (July–September 2019) before the consumption tax hike in FY 2023.

■Index

1. In the July–September quarter of 2020, the economy grew at an annualized rate of 21.4%.
　　・Hard-hit face-to-face service industry
　　・Tough employment situation
2. The real growth rate is expected to be -5.2% in FY 2020, 3.4% in FY 2021 and 1.7% in FY 2022.
　　・Real GDP will exceed its most recent peak in FY 2023