Japan—Structural reforms buoy growth outlook

16.09.2019 Export Finance Australia

Structural reforms are helping to revive growth in an economy that is Australia’s second-largest trading partner.

Japan’s economy has been acutely affected by the world economic slowdown. Among the drags on its performance are the rapidly ageing population (expected to reduce Japan’s workforce by 20% in the next two decades), and high government debt (234% of GDP) that could become unsustainable. The increase in the consumption tax in October 2019 should help support government finances, but will also weigh on domestic spending and the economy.

The key to overcoming these challenges is structural reform. There has been some progress of late, with legislation passed to address excessive overtime work and improve the treatment of non-regular workers. But recent analysis by the International Monetary Fund highlights several outstanding areas for reform.
Japan is Australia’s second-largest trading partner, with two-way goods and services trade valued at $85.6 billion in 2018. Japan was also the second-largest source of FDI in Australia ($105.9 billion in 2018). As a result, Australia stands to benefit from Japan’s efforts in tackling the long-running challenges that are weighing on economic growth.

This article is from the August edition of World Risk Developments. Read the other topics covered on their website
  • UK—Increased chance of no-deal Brexit
  • Trade—One left standing on WTO Appellate Body
  • US-China trade dispute—New round of escalation
  • Kenya—Judges halt first coal-fired power plant
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