Domestic Real GDP growth stood at 0.0% in 2014, well below the 1.7% consensus growth forecasted at the start of the year (source: ESP Forecast Survey published by the Japan Center for Economic Research).
Although companies increased capital expenditure, as they had in 2013, this was offset by sluggish private consumption on the back of consumption tax hike in April and a decline in real wages. However, recent economic indicators suggest an improvement in consumer sentiment, reflecting the recent drop in fuel prices and increasing expectations of wage growth on the back of rising corporate earnings, which are forecasted to reach a historical high in FY2015. As such, real GDP growth is expected to stand at around 1% in 2015, driven mainly by a further increase in capital expenditure as well as a recovery in private consumption and an increase in net exports.
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Head of Research, Japan