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Economic growth in Japan expected to accelerate in 2025: IMF

09 Feb '25

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Economic growth in Japan expected to accelerate in 2025: IMF

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Economic growth in Japan is expected to accelerate this year and converge to its potential of 0.5 per cent in the medium term, with private consumption strengthening further as above-inflation wage growth will boost households' disposable income, the IMF said.
Private investment is also expected to remain strong, supported by high corporate profits and accommodative financial conditions, it noted.

Economic growth in Japan is expected to accelerate this year and converge to its potential of 0.5 per cent in the medium term, with private consumption strengthening further as above-inflation wage growth will boost households’ disposable income, according to the International Monetary Fund (IMF), which recently concluded its 2025 Article IV mission to the country.

Private investment is also expected to remain strong, supported by high corporate profits and accommodative financial conditions, it noted.

Headline and core inflation are expected to converge to the central bank’s 2-per cent target in late 2025, helped by a moderation in commodity prices for oil and food, it said.

Inflation has surpassed the target for over two years and a tight labour market is delivering the strongest wage growth since the 1990s.

The current account surplus is expected to moderate in 2025 as the income balance narrows, with the trade balance remaining in deficit, it projected.

But Japan continues to face challenges from its aging population and high public debt, the IMF said.

Policy priorities are to re-anchor inflation expectations, rebuild fiscal buffers, and advance labor market reforms to support potential growth, it added.

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