ADB Expects Japan's Economy to Contract This Year and Recover Next Year

According to a report published by the Asian Development Bank (ADB), the Japanese economy is expected to contract in 2024 and recover in the following year. The report states that the economy lost momentum in the third quarter due to a decline in private and public investments, along with net exports deducting 1.6 percentage points from GDP growth compared to the previous quarter. ADB noted, "We expect economic activity to weaken in the fourth quarter due to real household spending remaining negative in September and real wages turning negative after briefly staying above inflation in June and July," while lowering Japan's GDP growth forecast for 2024 to -0.2%. However, they raised the outlook for 2025 to 1.2%, anticipating a swift recovery in real wage growth to support domestic demand. Inflation is also expected to progress toward the central bank's target with the support of government subsidies.