Japan's Economic Outlook for Fiscal Years 2021 and 2022

Economic Research Department Executive Research Fellow Taro Saito

■Summary

<Real GDP growth rate: FY 2021 3.1%, FY 2022 2.0%>

The Japanese economy has been stagnant since the beginning of 2021. Real GDP in the April–June quarter of 2021 grew at an annual rate of 1.3%. Increases in private consumption, housing investment and capital investment offset a fall in external demand. However, real GDP has yet to regain the decline of 3.7% in the January–March quarter of 2021.
A continued declaration of the state of emergency and expanded coverage of the country are likely to continue low growth in the July–September quarter of 2021, mainly due to sluggish consumption. In contrast, the October–December quarter of 2021 expects high growth given the lifting of the state of emergency. However, there is a risk that the coronavirus pandemic and corresponding restrictions on economic activity could dampen the economy.
The real GDP growth rate is forecast to be 3.1% in FY 2021 and 2.0% in FY 2022. Even if restrictions on economic activities are eased, consumer spending will not recover in earnest as social distancing requirements will continue to restrain consumption of face-to-face services.
Real GDP is expected to recover from pre-coronavirus levels (October–December quarter 2019) in the January–March quarter in 2022 and return to its most recent peak (July–September quarter 2019) in 2023.

■Index

1. The economy grew at an annualized rate of 1.3% in the April–June quarter of 2021
　　・Growing gap in growth rates between Japan and the United States
2. Real growth rate is expected to be 3.1% in FY 2021 and 2.0% in FY 2022.
　　・July–September quarter is also expected to remain sluggish
　　・Exports and capital investment will support the economy
　　・Real GDP will exceed its most recent peak in FY 2023