Economic and Energy Outlook of Japan through FY2018

摘要

Summary of economy and energy outlook [Reference Scenario]Macro economy and production activity | Japanese economy slows down its expansion in FY2018. Trade balance's surplus diminish.Firm growth in both domestic and foreign demand expands the Japanese economy by 1.8% in FY2017. Although FY2018 enjoys firm private consumption under favourable employment and income and strong private capital investment, the GDP growth will decelerate to 1.1% due to the slower expansion of exports. This year, the index of industrial production experiences its highest level since the Lehman shock (+3.3%), with the chemical and machinery industries being large contributors. Although we are expecting firm demand during FY2018 in anticipation for the 2020 Summer Olympics in Tokyo, some demand related to the superconducting maglev construction and last minute demand prior to the next VAT hike in October 2019, decelerated exports (such as machinery) leads to a slower growth of the index (+1.3%). Trade balance, which turned positive at JPY4 trillion in FY2016, diminishes to JPYl.9 trillion in FY2017 and will almost plunge into negative in FY2018 because of rising energy prices.