The Japanese economy continued to recover at a moderate pace in 2022, as the COVID-19 pandemic has shifted gradually to an endemic phase. Private consumption remained robust, underpinning the recovery of economic activities from the pandemic. Business investment began to show some signs of improvement. Exports continued to grow at a slower pace than imports.
Consumer price inflation accelerated in 2022, driven by soaring energy and food prices. Core Consumer price index (CPI), less fresh food, rose by 3.7 percent year-on-year in November 2022, which exceeded the Bank of Japan’s (BOJ) price stability target. Looking ahead, core CPI (less fresh food) inflation is projected to slow to 1.2 percent in 2023 from 2.3 percent in 2022.
Japan’s external position stayed strong in 2022, supported by a large primary income surplus and substantial foreign reserves despite widening trade deficits. The yen depreciated sharply against the U.S. dollar, by more than 12 percent in 2022, reflecting a diverging monetary policy stance and widening trade deficit.