Japan’s Economic Outlook for the Fiscal Years 2023 and 2024 (August 2023)

Economic Research Department Executive Research Fellow Taro Saito

■Summary

<Real growth rate: 1.6% in FY 2023 and 1.4% in FY 2024>

Real GDP grew at a high rate of 1.5% from the previous quarter (equivalent to an annualized rate of 6.0%) in the April-June quarter of 2023. However, this growth was significantly affected by a sharp decline in imports, which will likely lead to negative growth in the July-September quarter.
Real GDP growth is forecast to be 1.6% in FY 2023 and 1.4% in FY 2024. Exports are not expected to be the driving force for the economy in the foreseeable future. Rather, the Japanese economy is expected to continue to grow primarily as a result of domestic demand.
Nominal GDP growth in FY 2023 is expected to reach 5.0%, marking the highest rate in 32 years. The GDP deflator has been rising sharply, resulting in nominal GDP continuing to outpace real GDP.
The consumer price inflation rate (excluding fresh food) is projected to fall from the current 3% level to the upper 2% level after the fall of 2023, but it will not fall below the Bank of Japan's 2% price target until the commencement of FY 2024. This fall can be attributed to a sharp decline in import prices. By contrast, the rate of increase in service prices is likely to rise further, propelled by a remarkable surge in wage rates, marking a 30-year high. Finally, the consumer price inflation rate (excluding fresh food) is predicted to rise by 2.8% in FY 2023 and by 1.6% in FY 2024.

Changes in real GDP growth rate (fiscal year)

■Index

1．6.0% annualized positive growth in April-June quarter 2023 from the previous quarter
　　・Exports are not expected to be the driving force of the economy
　　・Inbound tourist demand is rapidly recovering
　　・The rate of wage increase in the spring labor offensive was the highest it has been in
　　　30 years.
2．Real GDP growth rate is projected to be 1.6% in FY 2023 and 1.4% in FY 2024
　　・Growth will continue to be supported by domestic demand
　　・Household savings rate approaches normal level
　　・Medium- to long-term growth expectations among corporations will gradually
　　　increase
　　・Nominal GDP growth rate in FY 2023 set to be the highest it has been in 32 years
　　・Outlook for consumer price inflation