The International Monetary Fund (IMF) released its latest World Economic Outlook report on Tuesday, lowering Japan’s economic growth forecast for 2024 to 0.3%, a 0.4 percentage point reduction from its prediction three months ago. This growth rate marks the lowest level since the COVID-19 pandemic in 2020, indicating numerous challenges facing the Japanese economy.
According to the IMF’s analysis, multiple factors contributed to the downward revision of Japan’s economic growth forecast. First is the “fading of one-off factors,” such as the weakening momentum of tourism growth that supported economic expansion in 2023. Second, supply chain disruptions caused by the safety scandal at Toyota Motor Corporation’s subsidiary have negatively impacted the economy. This significant downward revision among major economies comes as Japan is in the midst of a general election, making economic revitalization a crucial campaign issue.
However, the IMF maintains a relatively optimistic outlook for Japan’s economy in 2025. Driven by wage and consumption growth, Japan’s economic growth rate is expected to recover to 1.1% in 2025, up 0.1 percentage points from July’s forecast. This suggests a potential gradual stabilization and recovery of the Japanese economy.
Regarding the global economy, the IMF’s overall outlook remains largely stable. Global economic growth is projected at 3.2% for 2024, unchanged from three months ago, and is expected to maintain at 3.2% in 2025, only 0.1 percentage points lower than previous forecasts.
Forecasts for other major economies show that U.S. economic growth expectations for 2024 have been revised upward to 2.8%, an increase of 0.2 percentage points, primarily due to strong consumer spending and capital investment. For China, due to continued weak consumer confidence and a sluggish real estate sector, the 2024 growth forecast has been lowered from 5.0% to 4.8%, while 2025 remains unchanged at 4.5%. The Eurozone’s growth forecast has also been reduced to 0.8%, partly due to manufacturing slowdown in Germany.
IMF Chief Economist Pierre-Olivier Gourinchas stated at the press conference that while “the battle against inflation is nearly won,” the global economy still faces downside risks. He specifically mentioned challenges posed by protectionist policies, warning that while such measures might stimulate investment and economic activity in the short term, they could trigger retaliation and ultimately fail to sustainably improve living standards.
The report also notes that despite ongoing geopolitical tensions, global trade’s share in the world economy hasn’t significantly decreased. However, signs of “geoeconomic fragmentation” are emerging, with more trade occurring within geopolitical blocs rather than across them.
Key Points:
- IMF lowers Japan’s 2024 economic growth forecast to 0.3%, the lowest since the pandemic.
- Downward revision due to weakening tourism growth momentum and automotive supply chain disruptions.
- Japan’s economic growth expected to recover to 1.1% in 2025.
- Global economic growth forecast remains stable at 3.2%.
- U.S. economic forecast revised upward, while China and Eurozone forecasts lowered.
- IMF warns of risks from trade protectionism.
- Global trade shows trends of geoeconomic fragmentation.
- Despite easing inflation pressures, economies still face downside risks.
