Japan: Growth to continue through fiscal 2017 - Danske Bank

Analysts from Danske Bank expect growth to continue through fiscal 2017, supported by a very strong labour market, the global economic recovery and extremely accommodative economic policies.

Key Quotes: 

“Japan is showing itself to be in good shape as the economic upswing is the longest-standing since the crisis.”

“We expect growth to continue through fiscal 2017, supported by a very strong labour market, the global economic recovery and extremely accommodative economic policies.”

“As fiscal stimulus wanes next year, we are likely to see growth rates return to lower levels around potential.”

“We expect monetary policy to remain extremely accommodative throughout the forecast period, which will also be supportive for demand, both domestically and abroad. BoJ has pledged to hold measures in place until the 2% inflation target is reached. Inflation has been increasing through 2017, but mainly due to rising energy prices. Underlying price pressure in Japan remains very low and BoJ’s inflation target is currently nowhere within reach.”

“Almost three decades of very low inflation mean companies are reluctant to raise prices and try to cut back on services and streamline their operations instead of raising wages. Low worker mobility and a preference for job security over wage increases are big obstacles for wage inflation.”

“Public spending is also set to remain supportive for the economy through the fiscal year 2017, which runs from Q2 17-Q1 18. We expect to see GDP-growth around 2% q/q annualised through the rest of fiscal 2017 and a significant slowdown in fiscal 2018 when stimulus starts to wear off.”