Medium-Term Economic Outlook (FY2022 to FY2032)

■Summary

Global real GDP growth rate is projected to slow down to 2.8% in 2023 due to higher inflation and monetary tightening despite progress in the recovery from the COVID-19 pandemic. Thereafter, it is expected to decline to around 2.5% by the end of the forecast period due to slower growth in emerging economies against a backdrop of falling birthrates and aging populations.
Japan’s real GDP is expected to grow by 1.0% on average over the 10 years to fiscal 2032. We assume that the potential growth rate will recover to around 1% by the mid 2020s through further promotion of labor participation and investment in both physical and human capital to improve productivity, such as through digitization. The CPI (all items less fresh food) inflation rate is projected to decline from 2.5% in fiscal 2022 to 1.1% in fiscal 2023, and then to gradually increase thereafter. However, it will be difficult to achieve the price stability target of 2%. The average CPI inflation rate for the next 10 years will be 1.2%.
We assume that the BOJ will begin normalizing monetary easing in fiscal 2028. Although the price stability target will not be achieved, the inflation rate will temporarily be close to 2% by this time. Moreover, 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: The data contained in this report has been obtained and processed from various sources, and its accuracy or safety cannot be guaranteed. The purpose of this publication is to provide information, and the opinions and forecasts contained herein do not solicit the conclusion or termination of any contract.