Japan: Trend growth rate to be around 0.5% - BNPP

Based on the new GDP statistics published in December, analysts at BNP Paribas now estimate Japan’s trend growth rate to be around 0.5%, rather than around 0% that we had previously estimated.

Key Quotes

“The Bank of Japan will also likely revise up its estimate by a similar amount. According to our calculations, after having declined to 0.2% in 2009, the trend growth rate has been recovering, though the pace of improved has slowed over the past few years.”

“The modest improvement in the trend growth rate since 2009 has been largely due to the rise in labour participation rate, particularly among women and the elderly. In contrast, total factor productivity growth has continued to slow in trend terms. Aggressive fiscal and monetary policies may be causing a misallocation of resources.”

“We estimate the output gap to be around +1%, and expect it to continue to pick up in 2017.”