Japan: Revising GDP forecasts – Standard Chartered

Standard Chartered lowers their 2024 growth forecast to 0.0% from 0.6% on weaker H1 growth and statistical GDP revisions. Japan’s economy is likely to recover gradually, supported by domestic consumption. Standard Chartered raises their CPI forecasts on still-sticky inflation due to wage growth and reduced utility subsidies, Standard Chartered’s macro analyst Chong Hoon Park notes.

H2 to be better than H1, but not strong enough 

“We lower our 2024 GDP growth forecast to 0.0% from 0.6% on a weaker-than-expected H1 performance and likely diminished growth momentum in H2. We expect the Bank of Japan (BoJ) to maintain a hawkish policy stance due to concerns over persistent inflation and its impact on domestic consumption and investment. Consequently, we raise our CPI inflation forecast for 2024 to 2.5% from 2.4%, as inflation remains stubbornly high, driven by wage increases and the phasing out of government energy subsidies. We also revise higher our 2026 CPI inflation forecast to 2.0% from 1.8%.”

“That said, Japan's economy is gradually recovering, supported by fiscal policies and an improvement in employment and income. As a result, we revise our 2025 growth forecast to 1.3% from 1.1%. We also raise our 2026 growth forecast to 1.0% from 1.2% due to base effects.”

“Following statistical revisions to GDP data by the Cabinet Office, the BoJ revised down its growth forecast for FY24 (year ending March 2025) by 0.2ppt to 0.6% and emphasised that the revision is primarily due to changes in GDP statistics rather than a shift in the overall economic outlook.”