In the October–December quarter of 2023, the real GDP grew at an annualized rate of ˗0.4% from the previous quarter, which marked the second consecutive quarter of negative growth. This decline was primarily due to a drop in domestic demand. Despite the normalization of socioeconomic activities following the reclassification of COVID-19 as a Class 5 disease, both private consumption and capital investment declined for the third consecutive quarter.
Projections indicate that the real GDP growth will be 1.2% in FY2023, 1.0% in FY2024, and 1.1% in FY2025. In the second half of FY2024, a shift to domestic demand-led growth is expected. Moreover, real-wage growth is anticipated because of a slowdown in the inflation rate.
The nominal GDP continues to outpace the real GDP. The nominal GDP growth in FY2023 is expected to reach 5.2%, the highest in 32 years. Furthermore, the nominal GDP is projected to exceed 600 trillion yen in FY2024.
Consumer prices (excluding fresh food) are expected to rise to 2.8% in FY2023, 2.1% in FY2024, and 1.5% in FY2025. While the increase in the prices of goods has slowed down, the prices of services have risen to the 2% seen the previous year. The high prices of services are likely to persist, as companies continue to pass on the higher labor costs associated with wage increases to their consumers.