Economic Outlook for Fiscal Years 2023 and 2024 (May 2023)

Economic Research Department Executive Research Fellow Taro Saito

■要旨

<Real growth rate: 0.9% in FY2023 and 1.6% in FY2024>

Real GDP in the January–March quarter of 2023 grew at an annualized rate of 1.6%, the first positive growth in three quarters, as private consumption, housing investment, and capital investment increased together, despite a decline in exports due to the slowdown in overseas economies.
Exports are not expected to be the driving force of the economy in the foreseeable future, and the Japanese economy is likely to continue to grow primarily as a result of domestic demand. Real GDP growth is forecast to be 0.9% in FY2023 and 1.6% in FY2024—a lower growth rate is predicted in FY2023 due to deteriorating external demand, and a higher growth rate is predicted in FY2024 because overseas economies are expected to recover and therefore exports are expected to increase.
With the COVID-19 infection shifting to category 5, a sharp recovery in face-to-face service consumption and inbound tourist demand is expected. Thus, the government's goal of increasing inbound travel consumption to 5 trillion yen is likely to be achieved in 2023.
The consumer price inflation rate (composite, excluding fresh food) will slow from the current 3% level to the upper 2% level by the summer but is not expected to fall below the price target of 2% until after 2024. While a lull in the rise in crude oil prices and the depreciation of the yen will weaken the trend of passing on raw material costs to prices, the rate of increase in service prices will increase as the rate of wage hikes rises. The pace of service price hikes could be very fast, as no price hikes have been implemented for a long period of time. The consumer price inflation rate (excluding fresh food) is projected to be 2.4% in FY2023 and 1.3% in FY2024.

■目次

1．1.6% annualized positive growth in Jan–Mar quarter of 2023 compared to the previous quarter
・Exports are not expected to be the driving force of the economy
・Face-to-face service consumption and inbound tourist demand expected to recover rapidly
・Spring Wage Hike Rate to Highest Level in 30 Years
2．Real growth rate is forecast to be 0.9% in FY2023 and 1.6% in FY2024.
・Growth will continue to be supported by domestic demand
・Outlook for inflation