What's NewThe approval rate for PM Abe suffered 11 points plunge in March

The document tampering scandal is dealing a severe blow to PM Abe's approval rate. Our trimmed average measure of 7 media polls show a decline from 48% in February to 36.7% in March. (March 19th, 2018)

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After the landslide electoral victory in 2017, it looked certain that Prime Minister Abe would stay on for a few more years. A new development in a year-old cronyism scandal raises a possibility that he may not survive 2018 as Japan's Prime Minister. A leadership election for his ruling party, LDP, is scheduled this September and there is a chance he would be persuaded not to run. Mr. Abe may stay on as a kingmaker, but a fresh face at the top seat of the government will likely bring substantial changes to the policy mix in Japan. In our view, the changes are likely to take the direction toward fiscal consolidation and more conservative monetary policies.

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Until recently, foreign workers were not of macroeconomic concern as the number was too small. As it now accounts for 2% of the total workforce and growing nearly 20% per year, it could soon start to have a meaningful economic impact on Japan's labor market, consumption and most importantly, on the longer-term growth outlook for Japan.

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Judging by the weak industrial output and retail sales for January, there is a good chance the January-March quarter would show a negative growth for Japan, ending the eight-quarters-long positive growth streak. The weak economic activities in January were due to transitory factors and there is yet no reason to turn pessimistic on Japan's growth outlook though. Seeing a negatively growing quarter may also be a good wake up call for Japanese policymakers who have become complacent about achieving sustained reflation.

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February 15 2018, 20:00 JST

Moving Toward Self-Sustained Growth

JMA Monthly Chartbook is a new product we started in 2018. We continue to be positive on the growth outlook for Japan, forecasting Japan to grow at 1.6% in 2018, at the same pace as in 2017. In the February edition of the Monthly Chartbook, we present the Japanese economy through 30 charts, encompassing economic activity, inflation, politics, and longer-term issues. For each chart, there is a link that leads you to a corresponding interactive online chart so that you can explore issues further. The Chartbook also includes our latest economic projections.

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It is almost official. The Japanese government leaked their intention to re-appoint the BoJ governor Haruhiko Kuroda when his current term expires on April 8. What are the key challenges for him in the next five years? On the upside, Mr. Kuroda may need to engineer an exit from the current stimulative monetary policy. On the downside, there is the seemingly impossible task of how to devise additional stimulus if the Japanese economy faces a downturn under his watch. In our view, the latter is the ultimate challenge for Mr. Kuroda. While the current economic expansion may last for a few years, it is likely that a recession hits Japan and force the BoJ to devise an imaginative way, something beyond even beyond the current unconventional monetary policy, to save Japan from falling back to deflation again.

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