{
  "title": "IMF Executive Board Concludes 2023 Article IV Consultation with Japan",
  "publication": "IMF News, March 31, 2023",
  "sourceUrl": "https://www.imf.org/en/news/articles/2023/03/30/pr23100-japan-imf-executive-board-concludes-2023-article-iv-consultation",
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  "summary": "IMF Executive Board Concludes 2023 Article IV Consultation with Japan",
  "publishDate": "2023-03-31",
  "sections": [
    {
      "heading": "Recent economic performance",
      "content": "- Real GDP increased by 1.1 percent in 2022 and remains below the level in 2019 (on an annual basis).\n- Private consumption led the recovery and private investment also rebounded.\n- Industrial production recovered strongly during the summer as supply chain constraints due to lockdowns eased.\n- Headline inflation has been above 2 percent y/y since April driven by external factors including the lagged effects of higher commodity prices and yen depreciation.\n- The current account surplus narrowed to 2.1 percent of GDP in 2022 due to a sharp rise in the value of commodity imports.\n- The external position in 2022 is assessed as broadly in line with medium-term fundamentals and desirable policies.\n- The banking sector remains resilient, with capital adequacy and liquidity ratios above regulatory requirements, but interest and credit risks have increased."
    },
    {
      "heading": "Near-term outlook and projections",
      "content": "- Growth is expected to accelerate to 1.3 percent in 2023 driven by private consumption and business fixed investment.\n- The output gap is projected to close in early 2023.\n- Exports will rise as supply side constraints ease and inbound tourists return.\n- Inflation is expected to rise further in early 2023 due to the delayed effect of yen depreciation and border reopening before declining again.\n- The primary fiscal deficit will stay elevated in 2023 following the adoption of the October 2022 fiscal package.\n- The current account surplus is projected to bounce to an average of 2.9 percent of GDP in 2023 driven by lower commodity prices and inbound tourism.\n- An aging and declining population will continue to be a major macroeconomic challenge in the medium and long term."
    },
    {
      "heading": "Risks and scenarios",
      "content": "- Downside risks to growth include:\n  - deepening geo economic fragmentation and geopolitical tensions;\n  - an abrupt slowdown of the global economy;\n  - commodity price volatility;\n  - natural disasters; and\n  - cyberthreats.\n- Additional domestic risk: potential abrupt change of the current monetary policy framework.\n- Upside risks to growth: a more robust recovery of consumption, especially services, and a stronger-than-expected recovery of inbound tourism.\n- Inflation risks are two-sided, with the upside more prominent in the short term."
    },
    {
      "heading": "Executive Board assessment and policy guidance",
      "content": "- Near-term policy focus:\n  - Achieving the two percent inflation target durably.\n  - Preserving financial stability.\n- Medium-term policy focus:\n  - Reducing fiscal vulnerabilities.\n  - Transitioning to a more dynamic, digitalized, green, and inclusive economy.\n- Fiscal policy:\n  - Growth-friendly fiscal consolidation is warranted to rebuild fiscal buffers and ensure debt sustainability.\n  - Consolidation should be underpinned by a credible medium-term fiscal framework to reduce the primary deficit and put the debt-to-GDP ratio on a clear downward path.\n  - Pandemic-related fiscal support should be withdrawn in a timely manner.\n  - Consolidation efforts should include both revenue and expenditure measures, including better targeted fiscal support to vulnerable households.\n- Monetary policy:\n  - Maintaining an accommodative monetary policy stance remains appropriate to achieve the two percent inflation target durably.\n  - Many Directors encouraged considering options for introducing more flexibility under the yield curve control framework to better manage risks and address side effects of prolonged easing.\n  - Many Directors stressed the need to avoid a premature exit from monetary easing and agreed with the authorities that maintaining the current monetary policy framework is appropriate.\n  - Any changes to monetary policy settings should be well communicated to facilitate smoother transitions and protect financial stability.\n  - The exchange rate should continue to act as the main shock absorber, limiting foreign exchange interventions to special circumstances, including disorderly market conditions.\n- Financial sector:\n  - Interest-rate and credit risks have increased and warrant close monitoring.\n  - Consider appropriate implementation of macroprudential policies to curb financial vulnerabilities as they emerge.\n- Structural policies:\n  - Boost income growth, support startups, deepen digitalization, and achieve climate targets.\n  - Labor market policies should encourage more women and older persons to join the work force, reduce labor market duality, and improve mobility.\n  - Encourage the Digital Agency to continue coordinating and implementing policies to digitalize the public sector.\n  - Higher carbon pricing could help achieve climate-related targets in a growth-friendly way and should be accompanied by measures to protect the most vulnerable and enable an orderly transition from high-emission to low-carbon sectors."
    },
    {
      "heading": "Key statistics (selected figures from Table 1: Japan: Selected Economic Indicators, 2019–24)",
      "content": "- Real GDP (percent change): 2019: -0.4; 2020: -4.3; 2021: 2.1; 2022 Est.: 1.1; 2023 Proj.: 1.3; 2024 Proj.: 1.0.\n- Private consumption (percent change): 2019: -0.6; 2020: -4.7; 2021: 0.4; 2022: (value not listed in table body).\n- Business investment (percent change): 2019: -0.7; 2020: -4.9; 2021: 1.9; 2022: 3.1; 2023: 2.4.\n- Headline CPI (period average, percent change): 2019: -0.2; 2020: 2.7; 2021: 2.2.\n- Government revenue (percent of GDP): 2019: 34.2; 2020: 35.5; 2021: 36.6; 2022: 36.2; 2023: 35.7; 2024: 35.4.\n- Government expenditure (percent of GDP): 2019: 37.3; 2020: 44.6; 2021: 42.8; 2022: 44.0; 2023: 42.1; 2024: 39.4.\n- Overall balance (percent of GDP): 2019: -3.0; 2020: -9.1; 2021: -6.2; 2022: -7.8; 2023: -6.4; 2024: -4.0.\n- Primary balance (percent of GDP): 2019: -2.4; 2020: -8.4; 2021: -5.6; 2022: -7.5; 2023: -3.8.\n- Public debt, gross (percent of GDP): 2019: 236.4; 2020: 258.7; 2021: 255.4; 2022: 261.3; 2023: 258.2; 2024: 256.3.\n- Current account balance (billions of USD): 2019: 176.3; 2020: 147.9; 2021: 197.3; 2022: 90.0; 2023: 131.8; 2024: 180.3.\n- Current account (percent of GDP): 2019: 3.9; 2020: 3.0.\n- Trade balance (billions of USD): 2019: 26.6; 2020: 15.6; 2021: -117.8; 2022: -83.0; 2023: -25.6; 2024: -2.8.\n- Exports of goods, f.o.b. (billions of USD): 2019: 695.0; 2020: 630.6; 2021: 748.6; 2022: 751.2; 2023: 779.3; 2024: 814.6.\n- Imports of goods, f.o.b. (billions of USD): 2019: 693.6; 2020: 604.0; 2021: 732.9; 2022: 869.1; 2023: 862.3; 2024: 840.2.\n- Energy imports (billions of USD): 2019: 131.9; 2020: 89.1; 2021: 127.8; 2022: 194.0; 2023: 162.3.\n- Change in reserves (billions of USD): 2019: 25.5; 2020: 10.9; 2021: 62.8; 2022: -47.4; 2023: 11.5.\n- Total reserves minus gold (in billions of US$): 2019: 1286.3; 2020: 1348.2; 2021: 1356.2; 2022: 1178.3.\n- Yen/dollar rate (period average): 2019: 109.0; 2020: 106.8; 2021: 109.8; 2022: 131.5.\n- Real effective exchange rate (ULC-based, 2010=100): 2019: 75.2; 2020: 75.3; 2021: 73.0; 2022: 62.0.\n- Population Growth (percent): 2019: -0.3.\n- Old-age dependency (percent): 2019: 47.6; 2020: 48.3; 2021: 48.7; 2022: 48.9; 2023: 49.3; 2024: 49.8.\n\nIMF Communications Department, Press Release No. 23/100, March 30, 2023 — Executive Board conclusion of the 2023 Article IV consultation with Japan.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Japan and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2023/03/30/pr23100-japan-imf-executive-board-concludes-2023-article-iv-consultation"
    }
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    "Published: March 31, 2023",
    "Real GDP increased by 1.1 percent in 2022 and remains below the level in 2019 (on an annual basis).",
    "Private consumption led the recovery and private investment also rebounded.",
    "Industrial production recovered strongly during the summer as supply chain constraints due to lockdowns eased.",
    "Headline inflation has been above 2 percent y/y since April driven by external factors including the lagged effects of higher commodity prices and yen depreciation.",
    "The current account surplus narrowed to 2.1 percent of GDP in 2022 due to a sharp rise in the value of commodity imports.",
    "The external position in 2022 is assessed as broadly in line with medium-term fundamentals and desirable policies.",
    "The banking sector remains resilient, with capital adequacy and liquidity ratios above regulatory requirements, but interest and credit risks have increased.",
    "Growth is expected to accelerate to 1.3 percent in 2023 driven by private consumption and business fixed investment.",
    "The output gap is projected to close in early 2023.",
    "Exports will rise as supply side constraints ease and inbound tourists return.",
    "Inflation is expected to rise further in early 2023 due to the delayed effect of yen depreciation and border reopening before declining again.",
    "The primary fiscal deficit will stay elevated in 2023 following the adoption of the October 2022 fiscal package.",
    "The current account surplus is projected to bounce to an average of 2.9 percent of GDP in 2023 driven by lower commodity prices and inbound tourism.",
    "An aging and declining population will continue to be a major macroeconomic challenge in the medium and long term.",
    "Downside risks to growth include:",
    "Additional domestic risk: potential abrupt change of the current monetary policy framework.",
    "Upside risks to growth: a more robust recovery of consumption, especially services, and a stronger-than-expected recovery of inbound tourism.",
    "Inflation risks are two-sided, with the upside more prominent in the short term.",
    "Near-term policy focus:",
    "Medium-term policy focus:",
    "Fiscal policy:",
    "Monetary policy:",
    "Financial sector:",
    "Structural policies:",
    "Real GDP (percent change): 2019: -0.4; 2020: -4.3; 2021: 2.1; 2022 Est.: 1.1; 2023 Proj.: 1.3; 2024 Proj.: 1.0.",
    "Private consumption (percent change): 2019: -0.6; 2020: -4.7; 2021: 0.4; 2022: (value not listed in table body).",
    "Business investment (percent change): 2019: -0.7; 2020: -4.9; 2021: 1.9; 2022: 3.1; 2023: 2.4.",
    "Headline CPI (period average, percent change): 2019: -0.2; 2020: 2.7; 2021: 2.2.",
    "Government revenue (percent of GDP): 2019: 34.2; 2020: 35.5; 2021: 36.6; 2022: 36.2; 2023: 35.7; 2024: 35.4.",
    "Government expenditure (percent of GDP): 2019: 37.3; 2020: 44.6; 2021: 42.8; 2022: 44.0; 2023: 42.1; 2024: 39.4.",
    "Overall balance (percent of GDP): 2019: -3.0; 2020: -9.1; 2021: -6.2; 2022: -7.8; 2023: -6.4; 2024: -4.0.",
    "Primary balance (percent of GDP): 2019: -2.4; 2020: -8.4; 2021: -5.6; 2022: -7.5; 2023: -3.8.",
    "Public debt, gross (percent of GDP): 2019: 236.4; 2020: 258.7; 2021: 255.4; 2022: 261.3; 2023: 258.2; 2024: 256.3.",
    "Current account balance (billions of USD): 2019: 176.3; 2020: 147.9; 2021: 197.3; 2022: 90.0; 2023: 131.8; 2024: 180.3.",
    "Current account (percent of GDP): 2019: 3.9; 2020: 3.0.",
    "Trade balance (billions of USD): 2019: 26.6; 2020: 15.6; 2021: -117.8; 2022: -83.0; 2023: -25.6; 2024: -2.8.",
    "Exports of goods, f.o.b. (billions of USD): 2019: 695.0; 2020: 630.6; 2021: 748.6; 2022: 751.2; 2023: 779.3; 2024: 814.6.",
    "Imports of goods, f.o.b. (billions of USD): 2019: 693.6; 2020: 604.0; 2021: 732.9; 2022: 869.1; 2023: 862.3; 2024: 840.2.",
    "Energy imports (billions of USD): 2019: 131.9; 2020: 89.1; 2021: 127.8; 2022: 194.0; 2023: 162.3.",
    "Change in reserves (billions of USD): 2019: 25.5; 2020: 10.9; 2021: 62.8; 2022: -47.4; 2023: 11.5.",
    "Total reserves minus gold (in billions of US$): 2019: 1286.3; 2020: 1348.2; 2021: 1356.2; 2022: 1178.3.",
    "Yen/dollar rate (period average): 2019: 109.0; 2020: 106.8; 2021: 109.8; 2022: 131.5.",
    "Real effective exchange rate (ULC-based, 2010=100): 2019: 75.2; 2020: 75.3; 2021: 73.0; 2022: 62.0.",
    "Population Growth (percent): 2019: -0.3.",
    "Old-age dependency (percent): 2019: 47.6; 2020: 48.3; 2021: 48.7; 2022: 48.9; 2023: 49.3; 2024: 49.8.",
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    "[Japan and the IMF](http://www.imf.org/external/country/JPN/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
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    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
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