2022 AMRO-ADBI Roundtable on the Japanese Economy
The ASEAN+3 Macroeconomic Research Office (AMRO) and ADB Institute (ADBI) held a joint roundtable event on Thursday, November 10, 2022 at the ADB Institute in Tokyo, Japan.
The ASEAN+3 Macroeconomic Research Office (AMRO) and ADB Institute (ADBI) held a joint roundtable event on Thursday, November 10, 2022 at the ADB Institute in Tokyo, Japan.
One of the longest-held notions in the financial markets is that the Japanese yen (JPY) is a safe-haven currency.
Japan’s sovereign credit rating has travelled along a downward trend over the last three decades, mainly due to the country’s subdued economic growth and deteriorating fiscal health.
Japan’s sovereign credit rating could fall one to three notches in the coming decade if the government does not implement a credible fiscal consolidation plan. This risk, which the ASEAN+3 Macroeconomic Research Office (AMRO) highlighted in its recent annual consultation report on the country, underlines the challenges facing Japanese policymakers at a time of mounting global economic turmoil.
In this October 2022 quarterly update, AMRO revised downwards its short-term growth forecast for the ASEAN+3 region. The continuing strict dynamic zero-COVID policy and real estate sector weakness in China and potential recessions in the United States and the euro area are weighing on the region’s outlook.
Over the last two years of the COVID-19 pandemic, central banks globally maintained similar policies to help lift growth and steady markets.
Regional banks in Japan were struggling with structural challenges even before the start of the COVID-19 pandemic. A shrinking pool of borrowers in an aging population, severe competition among banks, and a low interest rate environment held back the regional banks’ efforts to diversify their income sources and strengthen their financial performance. The pandemic only compounds their challenges.
The Japanese economy is expected to grow at a faster 2.9 percent in 2022 after a moderate 1.7 percent recovery in 2021, reflecting pent-up private consumption and business investment.
The Japanese economy should grow at a faster 2.9 percent in 2022 after a moderate 1.7 percent recovery in 2021 from the economic effects of COVID-19 restrictions.
Japan’s economy should recover moderately after being severely battered by the COVID-19 pandemic. As the economy reopens gradually, higher domestic spending from pent-up demand should lead to a rebound in growth.