Japan’s recently sealed free trade pacts with 10 Pacific Rim countries and with the European Union will increase real gross domestic product by an estimated ¥13 trillion ($114 billion), the government said Thursday.
The estimated combined effects of the revised Trans-Pacific Partnership and the trade agreement with the European Union, both expected to be implemented as early as 2019, would be equivalent to 2.5 percent of real GDP in fiscal 2016.
While the two deals are forecast to create 752,000 new jobs by boosting exports and investment, they will also reduce annual production of agriculture, forestry and fishery products by up to ¥260 billion due to tougher competition from lower-cost imports. The government aims to introduce steps to strengthen the heavily protected agricultural sector.
The trade pacts will play a large part in Prime Minister Shinzo Abe’s economic growth strategy, intended to help compensate for Japan’s shrinking domestic market as the population undergoes demographic changes.
The latest estimates put the two pacts on a par with the ¥13.6 trillion boost that the government estimated would result from the initial TPP deal, which was set to be agreed by 12 countries including the United States. The world’s biggest economy decided to leave the deal after President Donald Trump took office in January.
Growth is expected to be driven by exports and investments through the removal or lowering of tariffs and new rules to liberalize trade under the free trade agreements.
Of the ¥13 trillion in the latest estimate, around ¥7.8 trillion will come from the TPP and the rest from the Japan-EU free trade agreement.
As for the estimated new job creation, the TPP is expected to contribute 460,000 jobs and the trade agreement with the European Union 292,000 jobs.
It is estimated that the Pacific Rim pact will slash Japan’s agricultural, forestry and fisheries output by ¥90 billion to ¥150 billion, while the Japan-EU pact is likely to reduce it by ¥60 billion to ¥110 billion.
Japan and the other 10 TPP countries agreed last month to implement the revised pact, representing around 18 percent of the world’s GDP after the U.S. withdrawal.
The 10 countries are Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. A clear schedule to bring it into effect has yet to be set.
Japan and the European Union, meanwhile, finalized their free trade negotiations this month to create a deal that would cover nearly a third of global GDP.
It is the first time that the government has estimated the impact of the Japan-EU trade pact.