Economists Forecast Deflation in Japan This Year Due to Coronavirus

Economists Forecast Deflation in Japan This Year Due to Coronavirus

Posted Friday, June 12, 2020 by
Arslan Butt • 1 min read

A recent Reuters poll indicates that Japan is likely to slip back into a period of deflation as a result of the coronavirus pandemic on account of the restrictions imposed by the government to contain the spread of cases. More than half of the analysts polled anticipate that the BOJ could unveil more monetary easing even as the economy is expected to contract by over 20% in Q2 2020.

Economists have forecast that even after the pandemic is contained, the output gap in Japan could take much longer to return to positive territory, which would signal continuation of a mild deflation. 23 out of 40 economists polled indicate a high or very high likelihood of deflation in the country.

Core CPI in Japan is forecast to fall to -0.5% during the current fiscal year which ends in March 2021. Meanwhile, core consumer inflation could rise to 0.3% by the next fiscal year.

Economists have also forecast that Japan’s GDP could contract by 21.3% in the second quarter of the year and rebound into 8% growth during Q3 and 5.4% growth in Q4 2020. The overall GDP for the year is expected to come in at -5.2% this year, while the economy could grow by 3.2% in 2021, as per latest estimates by economists.

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