Japan: Expansion at an end

External shocks from the run-up in commodity prices and then international financial turbulence have brought Japan’s expansion to an end. Equity prices have plummeted and the yen has appreciated substantially. With falling exports, activity is projected to remain weak through 2009, pushing up unemployment and reducing headline inflation to near zero. A recovery in domestic demand is projected to lift output growth to around 1% during 2010, still short of the growth of potential.
The cut in the policy interest rate by the Bank of Japan should be accompanied by measures to support activity by providing sufficient liquidity to the market to limit the impact of financial stress and mitigate deflationary pressures. While the fiscal stimulus announced in late October will cushion the downturn in 2009, it will be important to focus again on fiscal consolidation as the economy stabilises, given the very high public debt ratio and the costs of ageing. Structural reforms to boost productivity, particularly in the service sector, remain a priority to improve living standards in the face of a shrinking working-age population.

Economic data

GDP growth: -9.8% Q2/Q1 2020 2020
Consumer price inflation: 1.3% Sep 2020 annual
Trade (G20): -17.7% exp, -16.7% imp, Q2/Q1 2020
Unemployment: 7.3% Sep 2020
Last update: 10 Nov 2020

OECD Observer Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Digital Editions

Don't miss

Most Popular Articles

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2020