2017.04.2017:28:00UTC+00Japanese Economy Likely to Grow 1 Pct in 2017 on Higher Exports Expectations, says Nordea Bank

The Japanese economy is currently expanding more than its estimated potential of 0.8 percent and is in a cyclical recovery, noted Nordea Bank in a research report. In the second half of 2016, net exports mainly contributed to the economic growth and are likely to be the main growth contributor in at least the first half of 2017.

Japan gains from the synchronised global recovery being an open economy. Stabilisation of China’s economic growth has been a welcome news for Japan. It sold 16 percent more to China in February 2017 as compared with the previous year. But the longer-term outlook for Japan’s exports continues to be clouded by the withdrawal of US from the Trans-Pacific Partnership. Even if the member nations promise to continue trade talks, Japan is not expected to gain lager benefits without the U.S.

The Japanese domestic demand hardly expanded in the second half of last year. The tight labor market and increasing consumer sentiment have led consumers to spend more but have not yet translated to continuous strong consumption growth, stated Nordea Bank. Even if increasing housing prices and high corporate profits are helping private investment, firms are consistently bullish regarding overseas business conditions.

According to Nordea Bank, the Japanese economy is likely to expand 1 percent in 2017 from 0.7 percent in 2016, owing to higher exports expectations. Meanwhile, the economy is expected to grow 0.8 percent next year, added Nordea Bank.