Medium-Term Economic Outlook (FY2021 to FY2031)

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  1. Global real GDP is projected to grow by 5.7% in 2021 due to the economic recovery from COVID-19 against the backdrop of the development of vaccination, but will fall to around 2.5% by the end of the forecast period.
  2. Assuming that severe restrictions on activities will not be imposed again due to the intensification of COVID-19, Japan's real GDP is expected to return to its pre-COVID-19 level in fiscal 2022.
  3. From the medium-term perspective, Japan's real GDP is expected to grow by 1.1% on average for the next 10 years (from FY2022 to FY2031). The potential growth rate is expected to recover to around 1% by the mid-2020s through further promotion of labor participation and increases in equipment and human resources investments for productivity improvements such as digitization. Although CPI inflation (all items less fresh foods) will gradually increase, it will be difficult to achieve the Bank of Japan’s (BOJ) price stability target of 2%. The average CPI inflation rate for the next 10 years will be 1.2%.
  4. We assume that BOJ will normalize its monetary easing in fiscal 2028. Although the 2% price stability target will not be achieved, the inflation rate will be close to 2% around fiscal 2028. BOJ will also have more concerns that the prolonged monetary easing might have led to an accumulation of side effects, such as the risk of instability in the financial system. Therefore, BOJ will start moving toward an exit strategy by stating that the objective of overcoming deflation has been substantially achieved, while leaving the 2% target as a long-term goal.

Please note that the data contained in this report have been obtained and processed from various sources, and their accuracy and safety cannot be guaranteed. The purpose of this publication is to provide information. The opinions and forecasts contained herein do not solicit the conclusion or termination of any contract.

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