Japan's real GDP to see positive growth as inflation eases: Deloitte

“Unfortunately, inflation could prove to be sticky, and trade tensions with the United States could threaten a vital source of growth for the country. We expect real GDP to return to positive growth as some inflationary pressures ease, but the rate will likely remain relatively subdued through at least the end of 2025,” Deloitte’s Michael Wolf wrote in an insights piece.

Despite announcements of strong wage increases, total wage growth in the country remains relatively weak, he noted. Total gross earnings were up by just 1 per cent year on year (YoY) in May. In inflation-adjusted terms, gross earnings were down by 2.9 per cent over the same period.

Even if wage growth accelerates for the rest of 2025, it is unlikely to reach the heights seen last year, he said.

Below-target western core inflation and an anticipated slowdown due to a changing global trade landscape suggest that monetary policy will remain on hold for at least the rest of this year, he wrote.

Evidence of a slowdown in trade is already showing up in statistics.

Trade barriers in the United States and weakening global growth are likely the two largest threats to Japan’s economy over the next year. Otherwise, Japan’s economy is in relatively good shape, he added.

ALCHEMPro News Desk (DS)