Forecasts for the Japanese economy - Nomura

Analysts at Nomura offered an overview of their revised forecasts for the Japanese economy.

Key Quotes:

"Masaki Kuwahara - NSC There are concerns over corrections in external demand and in production in Japan becoming protracted owing to downside for overseas economies. Yen appreciation and the Kumamoto earthquakes have further increased downside risks for the Japanese economy."

"Taking into account the possibility that economic slowing could persist, we now forecast real GDP growth in FY16 of +0.6% y-y. However, we think it likely that the economy will avoid a recession and will recover from 2016 H2."

"For FY17, we forecast real GDP growth of +0.9% y-y, with growth picking up slightly from FY16.

This outlook reflects prospects that (1) economic recovery in the US will feed through to upturns in exports and production in Japan, (2) expectations of rising US interest rates will tend to halt yen appreciation, (3) domestic demand in Japan will help underpin the economy, and (4) not only will the consumption tax hike be put back but also the government will come out with fiscal stimulus measures."

"For FY18, uncertainties have been growing especially with regard to overseas economies. In particular, we see concerns over signs that the US economy will gradually peak out. We now forecast that growth in real GDP in FY18 will slow slightly compared with FY17, to +0.7% y-y."