Japan's economy likely to recover, uncertainties extremely high: BOJ

29 Dec '22

2 min read

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Japan's economy is likely to recover, with the impact of COVID-19 and supply-side constraints waning, although it is expected to be under downward pressure stemming from high commodity prices and slowdowns in overseas economies, according to the Bank of Japan’s (BOJ) December 2022 statement on monetary policy. Uncertainties are extremely high for Japan's economy.

Thereafter, as a virtuous cycle from income to spending intensifies gradually, Japan's economy is projected to continue growing at a pace above its potential growth rate, the statement said.

"The year-on-year rate of change in the consumer price index (CPI of all items less fresh food) is likely to increase towards the end of this year due to rises in prices of such items as energy, food and durable goods.

"The rate of increase is then expected to decelerate toward the middle of fiscal 2022-23 as the contribution of such price rises to this CPI is likely to wane.

"Thereafter, it is projected to accelerate again moderately on the back of improvement in the output gap and rises in medium- to long-term inflation expectations and in wage growth," BOJ said.

High uncertainties remain in developments in overseas economic activity and prices; in commodity prices; and the course of COVID-19 at home and abroad and its impact. In this situation, it is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan's economic activity and prices, the statement by the central bank suggests.

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