Naoki Tamura: Economic activity, prices and monetary policy in Japan

Speech by Mr Naoki Tamura, Member of the Policy Board of the Bank of Japan, at a meeting with local leaders, Nagano, 6 February 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I. Economic Activity and Prices

A. Economic Activity

I will begin my speech by talking about economic activity in Japan. The Bank of Japan assesses that the economy has recovered moderately on the whole, although some weakness has been seen in part. In terms of the median of the Policy Board members' forecasts - as presented in the January 2025 Outlook for Economic Activity and Prices (Outlook Report) - Japan's real GDP growth rate is expected to be at 0.5 percent for fiscal 2024, 1.1 percent for fiscal 2025, and 1.0 percent for fiscal 2026 (Chart 1). While the projected growth rate for fiscal 2024 is low, this reflects the impact of negative growth in the January-March quarter of 2024, which was due to temporary factors such as a suspension of production and shipments at some automakers. Looking at the growth rates for fiscal 2024 on a quarter-on-quarter basis suggests that Japan's economy is likely to grow firmly. Thereafter, the economy is projected to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies.