Japan's GDP likely to grow around 1% in 2015-17

The Bank of Japan (BoJ) will maintain its existing quantitative and qualitative monetary easing program for the foreseeable future, with the country's monetary base increasing at an annual pace of around ¥80 trillion.

Following the October 30th monetary policy meeting, Japanese authorities noted that inflation will likely remain near zero in the near term (headline inflation stood at 0.0% y/y in September) yet will likely accelerate toward 2% y/y in the second half of fiscal year 2016 (April-March), conditional on a slight pick-up in international oil prices.

"Headline inflation of the economy is expected around 0.5% y/y in this year and pick up to only 1% by the end of 2016 due to largely absent demand-driven pressure on prices. In 2017, the second increase in the consumption tax rate rate from 8% to 10%, scheduled for April 2017, will temporarily take the inflation rate above the central bank's target", says Scotiabank. 

The Japanese economy will likely maintain its current momentum in the coming quarters, with real GDP expansion slightly above the BoJ's potential growth estimate of 0-0.5% y/y. Annual output of the economy is expected to grow on an average of around 1% in 2015-17, estimates Scotiabank.

The negotiations of the Trans-Pacific Partnership were concluded in early October. The agreement represents an important element in Prime Minister Shinzo Abe's economic revival plan; the "third arrow" of structural reforms includes the opening of the economy via trade liberalization.