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Medium Term Economic Forecast Economic Forecast (49th / FY2022-FY2035)

Promoting Innovation by Expanding Free Trade and Breaking Away from In-house Mentality

DX and human capital investment will get the Japanese economy on growth track again

Tatsuya ISHII
  Principal Economist
  Senior Economist
Katsuaki OCHIAI
  Specially Appointed Fellow
  Principal Economist


<<Key takeaways>>
  1. Baseline scenario--Negative growth may become the norm in the 2030s. The real GDP growth rate will be -0.1% per year (FY31-35 average) due to the negative private domestic demand growth. Throughout the forecast period, the fiscal deterioration will continue. The current account balance will remain in surplus, but the trade and services balance will remain in deficit. Some of the assumptions are as follows. Sanctions against Russia will continue throughout the forecast period regardless of the status of the Ukraine war. Oil price (WTI) will continue to fall until 2025, however, it will rise to $94.6 by 2035. In order to get the Japanese economy on a growth track again, it is essential to increase productivity. To achieve this, efforts must be made from the three perspectives; (1) expanding open innovation that utilizes internal and external resources, (2) accelerating and spreading DX, and (3) promoting free trade.
  2. Reform scenario--In this scenario, the productivity growth rate increases with the implementation of the initiative required as follows;
    • Raise business competitiveness (adaptability to future environment) to the level of the world's top 10
    • Raise the TFP levels of regional areas through promotion of digitalization
    • Maintain and strengthen the free trade system
    Therefore, the real GDP growth rate will improve to 0.6% (FY31-35 average). The current account surplus expands, and the trade and services balance become positive. However, the fiscal deterioration trend will continue.

Fig. Forecast of Real GDP Growth

Source: Cabinet Office “Annual Report on National Accounts” forecasted by JCER after FY2022.

 Tatsuya Ishii (Principal Economist), Tomoki Matsuo (Senior Economist), Katsuaki Ochiai (Specially Appointed Fellow), Tatsuo Kobayashi (Principal Economist), Trainee Economists: Ryohei Akutsu, Takahiro Kawauchi, Kazuki Ito, Aiko Fujii, and Norio Hibi.



Promoting Innovation by Expanding Free Trade and Breaking Away from In-house Mentality

DX and human capital investment will get the Japanese economy on growth track again

Economic Forecast 49th FY2022-FY2035



Japan’s economy after Russian invasion of Ukraine

- Soaring resource prices, risk of zero growth in the mid-2020s
- Tighter sanctions may cause negative growth
- DX effective for both countering high resource prices and for improving productivity in medical and long-term care

Economic Forecast 48th FY2021-FY2035


Japan’s post-COVID economy

- DX acceleration is a path to green growth
- Growth strategy under decarbonization constraints

Economic Forecast 47th FY2020-FY2035

Tatsuo KOBAYASHITetsuaki TAKANOSumio SARUYAMAKatsuaki OCHIAIKyoko DEGUCHIHirofumi KAWASAKITatsujiro SUZUKIHikaru KOBAYASHI/ Yuichi ARITA Trainee Economist (The House of Representatives)/ Tetsuji NAKAHARA Trainee Economist (HIGASHI-NIPPON BANK)/ Shunya MATSUO Trainee Economist (CHUBU Electric Power)


Economy before and after the Coronavirus Crisis

- Real GDP level will fall by 2% due to rapid expansion of debt
- Prolonged virus outbreak and intensified international friction will result in “nightmare scenario”

Economic Forecast 47th FY2020-FY2035



Toward Human Capital Investment to Support Domestic Demand

~The Key to Growth in a Shrinking Economy~

Medium-Term Economic Forecast 45th FY2018-FY2030

Saeko MAEDAKatsuaki OCHIAIAkira TANAKARyo HASUMI/ Chihiro SATO Trainee Economist(Secretariat of the House of Councillors)/ Takahisa HONDA Trainee Economist(Nikkei Inc.)/ Shogo YAMASHITA Trainee Economist(Aflac)