Japanese Economy: Macroeconomic Outlook


■ Economic expansion is very slow
■ The Bank of Japan plans to normalize its monetary policy under the leadership of the new president, but remains cautious about making amendments in advance.
    The Japanese economy continues to expand at an extremely slow pace, but due to the sluggish external demand, the sluggish growth of manufacturing activities such as exports and production is increasingly evident. In addition, under the condition that the price transfer of final products continues and the price of goods continues to rise, the real income shows a downward trend, and the financial environment is gradually tightened due to the rise of market interest rates.
    The real GDP growth rate of the quarter from October to December last year (preliminary data, 0.6% year-over-year) was positive for the first time in two quarters, but it was still extremely low. In the context of the decline in global commodity demand, the actual export in January (2.9% month-over-month) fell for the first time in 1 year and 3 months, and the mining industry production in January (4.6% month-over-month) fell to the level in 8 months. The downturn in manufacturing activity is obvious. With the downturn in imports and exports, the Cabinet Office's monthly economic report downgraded its assessment of the economic outlook in January to "recent signs of weakness in some areas, but is recovering moderately". This judgment was also placed in February. In January, the consumer price index (excluding the core CPI of fresh food: a year-over-year increase of 4.2%) continued to accelerate due to the impact of soaring food prices, while real wages (last December: a year-over-year decrease of 0.3%) fell to the lowest level since 2000. Although it fell to the lowest level since 2012, personal consumption expenditure (last December: 2.1% year-over-year) remained flat, showing relative resilience.
    The nomination plan for the governor and deputy governor of the Bank of Japan has been submitted to the Congress. At the hearing of the House of Representatives on the 24th, the candidate for the president of the Bank of Japan, Ueda, expressed his intention to promote the normalization of monetary policy, but took a cautious attitude towards the early revision in view of the side effects. Although the possibility of major changes to the monetary policy framework immediately after taking office has been reduced, the direction of future policy changes has been clear, and it is expected that the current policy will be revised in stages after April.