Japan’s Economic Outlook for Fiscal 2021 to 2023 (February 2022)

Economic Research Department Executive Research Fellow Taro Saito

■Summary

＜Real GDP growth rate: 2.5% in FY 2021, 2.5% in FY 2022, 1.7% in FY 2023＞

In the October–December quarter of 2021, real GDP posted an annualized growth rate of 5.4%, the first increase in two quarters, mainly due to a substantial increase in private consumption following the lifting of the state of emergency due to COVID-19.
In the January–March quarter of 2022, private consumption in real GDP will decrease due to the influence of COVID-19 priority preventative measures, and the real GDP growth rate will be only 0.4% per annum from the previous quarter. High growth is expected to continue after the start of FY 2022 on the assumption that the spread of the virus will calm down and activity restrictions will be lifted. However, there is a great deal of uncertainty regarding the trend of infection and measures to deal with it.
Real GDP growth rate is expected to be 2.5% in FY 2021, 2.5% in FY 2022 and 1.7% in FY 2023. Real GDP is expected to surpass its pre–COVID-19 level in the April–June quarter of 2022. Furthermore, in the April–June quarter of 2023, it is expected to return to the level of its most recent peak before the consumption tax rate hike (July–September quarter of 2019).
The consumer price inflation rate (excluding fresh food) is expected to be 0.0% year-on-year in FY 2021, 1.5% year-on-year in FY 2022, and 0.8% year-on-year in FY 2023. As energy prices continue to rise sharply and the rate of increase in food prices accelerates, CPI will climb to the upper 1% level after the start of FY 2022; however, it will slow to the upper 0% level in FY 2023, when the effects of high oil prices will be fully felt.

Changes in real GDP growth rate (fiscal year)

■Index

1. Annualized growth of 5.4% in the October–December quarter of 2021
　　・Increasing outflow of income overseas due to deterioration in terms of trade
2. Real GDP growth rate is expected to be 2.5% in FY 2021, 2.5% in FY 2022, and 1.7% in FY 2023
　　・Service consumption soars toward the end of 2021 after the lifting of the state of
　　　emergency
　　・The accelerating pace of inflation will depress real income
　　・Real GDP will exceed its most recent peak in FY 2023
　　・Price Outlook