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Japan Real GDP growth is projected at 1.8% in 2023 and 0.9% in 2024. The new economic policy package will support domestic demand, partly offsetting subdued household confidence and real income. Loss of momentum in trading partner economies will moderate exports. After peaking in the course of 2022, headline consumer price inflation will fall back in late 2023 as energy prices stabilise, but then gradually increase again towards 2% in 2024 as wage growth gains momentum. The labour market will continue to tighten gradually, with the unemployment rate falling to 2.4% in 2024. The measures to protect the most vulnerable households and firms in the face of higher prices should be temporary and more targeted. Monetary policy will remain accommodative but yield curve control is projected to be eased near the end of the projection period, when inflation reaches its target sustainably, accompanied by stronger wage growth. The latest economic package will also support longer-term growth, with investment in skills, digitalisation and the green transition. Diversifying energy sources, increasing the share of renewables and enhancing the electricity grid would improve energy security. External pressures are weighing on the domestic demand-driven recovery The 7th wave of COVID-19, starting from late June 2022, recorded the highest number of infections and deaths, but no confinement measures were introduced, limiting the impact on economic activity. In addition, border controls for foreign travellers have been gradually eased and were fully lifted in October. However, increasing prices have affected consumer sentiment. Energy and food prices remain the biggest driver of headline consumer price inflation, which reached 3% in August and September. However, cost increases have been only partly passed through into prices, and government measures, such as price caps on oil, have helped keep inflation relatively muted. The labour market has been tightening, but wage growth remains sluggish.
Japan 1
1. Nominal wages are total cash earnings per employee. Real wages are nominal wages deflated by the consumer price index excluding imputed rent. 2. Three-month moving average. Source: Ministry of Internal Affairs and Communications; Ministry of Health, Labour and Welfare; and OECD calculations. StatLink 2 https://stat.link/xwf783
OECD ECONOMIC OUTLOOK, VOLUME 2022 ISSUE 2: PRELIMINARY VERSION © OECD 2022