瑞惠证券-2018日本经济中期展望（英文版）-2018.6.28-36页-1mb

Mizuho Economic Outlook & Analysis Summary

Core Content

Mizuho Research Institute's economic outlook for Japan and the global economy in the 2020s is based on three major trends and three key challenges. The report forecasts sustained 1% growth for Japan by leveraging these trends and addressing the challenges. The global economic landscape is expected to shift from a unipolar US-centered order to a G2 order with the US and China as central players, while Japan's economy will face structural issues such as low wages and inflation, and demographic decline.

Three Mega-Trends

1. Geopolitical Conditions

   • The global power structure is shifting from a US-dominated order to a G2 order (US and China).
   • Japan is moving from a US-centric stance to a more balanced one.
   • The US-China contest may lead to increased protectionism and geopolitical risks.

2. Asia's Population Bonus

   • Asia's growing middle class is expected to drive consumer market expansion.
   • The population bonus in Asia, especially in South Asia and ASEAN, will continue for some time.
   • The rise of the middle class will be a key driver of demand in the region.

3. Normalization of Low Wages and Inflation

   • Japan and the US have experienced long-term declines in interest rates, reflecting low wage growth and inflation.
   • Monetary easing will likely shift to a game of endurance as low inflation is structural.
   • Long-term interest rates in Japan are expected to remain around 0%, while the US and Eurozone will stay around 1% to 3%.

Three Major Challenges

1. Post-Olympic Economic Impact

   • The 2020 Tokyo Olympics may lead to a temporary increase in capital investment, particularly in the Tokyo metropolitan area.
   • However, the long-term legacy effects and demand for facility renewal will support economic activity.
   • Inbound tourist demand is expected to remain strong, but Japan needs to improve its selection rate to reach the 60 million target by 2030.

2. Labor Shortage

   • Japan faces a significant labor shortage due to demographic decline.
   • Efforts to incorporate underutilized labor (youths, women, elderly) and promote teleworking are essential.
   • The Olympics could serve as a key juncture to improve work opportunities and infrastructure.

3. Productivity Improvement

   • Productivity growth is crucial for Japan's economic sustainability.
   • Investment in education and the use of AI and IoT are necessary to improve labor quality and address labor market mismatches.
   • Productivity improvements should not be limited to the ICT manufacturing sector but should extend to all sectors using ICT.

Key Economic Indicators

• Global Economic Outlook

  • The global real GDP growth is expected to remain around 3.6% from 2025 to 2028.
  • Asia is expected to grow faster than other regions, with China and India leading the way.
  • Japan's growth is projected to be around 1% annually, supported by structural reforms and external demand.

• Inflation Outlook

  • Inflation in Japan is expected to rise to the upper half of the 0% level in the medium-term.
  • The initial drop after the 2019 consumption tax hike will be temporary, followed by a gradual increase.

• Social Security Expenditure

  • Social security costs are rising due to demographic aging, with elderly benefits accounting for 46.4% of total social expenditure.
  • By 2040, social security costs are projected to reach 190 trillion yen.

• Fiscal Outlook

  • The primary balance will improve until 2020 due to the consumption tax hike.
  • However, the fiscal deficit will remain high due to rising medical and nursing care costs.
  • Outstanding government debt is expected to decline but remain at a very high level.

• BOJ Policy Adjustment Timing

  • The BOJ may adjust its policy after the US midterm elections in November 2018 and before the spring monetary policy meeting.
  • Policy adjustments will be difficult after 2020 due to the US shifting to interest rate cuts.
  • BOJ Governor Kuroda may not be able to normalize monetary policy during his term.

Conclusion

Japan's economy is expected to grow at around 1% in the 2020s, driven by three major trends: the shift in global power to a G2 order, the population bonus in Asia, and the normalization of low wages and inflation. To sustain this growth, Japan must overcome three major challenges: post-Olympic economic adjustment, labor shortages, and productivity improvements. The report emphasizes the need for structural reforms, investment in technology, and a more balanced approach to global economic relations.