As the Japanese economy greets the new year, overcoming the long period of deflation that has suffocated consumer spending and corporate investment should be the main goal of the government and the private sector. Firms can expect tailwinds from a rise in demand due to stepped-up efforts in reconstruction from the March 11 triple disaster. But factors such as the strong yen, Europe's sovereign debt crises and economic slowdowns in China and India could hamper Japan's recovery.
In its outlook for 2012, the government expects gross domestic product to grow 2.2 percent in real terms and 2 percent in nominal terms, thanks to corporate and housing investment stimulated by the ¥12 trillion third supplementary budget for fiscal 2011. The Organization for Economic Cooperation and Development forecast puts Japan's real GDP growth at 2 percent in 2012.
In issuing the outlook, the government assumed that Europe's governments will alleviate their sovereign debt crises. But the OECD forecasts that the eurozone economy will grow only 0.2 percent in real terms in 2012, down from 1.6 percent in 2011.