Japan’s economy remains in dire condition, but rebounding as a trend

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Below are the Highlights from the BoJ’s Quarterly Outlook Report, released alongside Friday’s monetary policy statement.

The Japanese economy is likely to recover, although activity remains low compared to pre-pandemic levels.

It is likely that the Japan’s consumer inflation hovers around 0% for the moment.

Japan’s consumer inflation is likely to accelerate gradually thereafter.

The Japanese economy remains in a severe state, but rebounding as a trend.

Japan’s economic outlook is highly uncertain, influenced by pandemic developments

Exports and production have continued to increase steadily.

Risks to Japan’s economic outlook have been sloping lower for the time being, balanced over the long term.

High uncertainties about the consequences of COVID-19.

Japan’s medium and long-term inflation expectations are moving sideways.

Downward pressure on the economy may increase due to COVID-19, including variants.

The appetite for spending of businesses and households cannot easily increase if long-term growth expectations decline due to the COVID-19 shock.

If COVID-19 has a greater impact than expected, there is a risk that the deterioration of the real economy will affect the stability of the financial system.

Company price cuts meant to boost demand are not likely to be widely seen.

Future developments in currency rates, international commodity prices, and import prices continue to deserve attention.

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