IMF lowers Japan’s 2016 growth outlook to 0.5%, economy likely to contract in 2017

The International Monetary Fund, in its latest Word Economic Outlook report, considerably lowered Japan’s economic growth outlook to 0.5% from its earlier forecast of 1%. The IMF lowered the global growth forecast too; however, Japan’s growth outlook revision was the highest out of all the developed economies, noted DBS Bank. This was mainly because of weak demand from emerging nations and yen’s recent gain.

Market forecasts for the nation’s growth prospect for 2016 have also declined. According to Bloomberg’s recent survey, consensus projects Japanese economy to expand 0.5% this year, as compared with the initial forecast of 1.2%. The Bank of Japan forecasts the economy to expand 1.5% in FY2016; however, it is likely to lower its forecast during its meeting in April, according to DBS Bank.

For 2017, IMF forecasts Japanese economy to shrink 0.1% on the implementation of a 2ppt hike in consumption tax. Meanwhile, the Bank of Japan projects the economy to slow to 0.3% next year, also based on the implementation of hike in consumption tax. On the contrary, market consensus projects the Japanese economy to remain flat at 0.5% next year. Based on the final details of Japanese government’s fiscal reform plans, the nation’s growth prospect for 2017 face risks on both the upside and downside, added DBS Bank.