Japan’s economy is projected to grow by 1.3% in 2025, as per the latest forecast from the ASEAN+3 Macroeconomic Research Office (AMRO). This moderate growth is expected to be driven by key factors such as wage increases, business investment, and stronger export performance. However, despite these positive indicators, inflation is anticipated to remain persistently high, staying above the Bank of Japan’s target. This presents a challenge for the country’s economic policy as high inflation could impact consumer spending and economic stability.
The report also highlights that Japan’s fiscal deficit is projected to widen, with public debt continuing to be a significant concern. Japan already carries one of the highest levels of public debt among developed nations, and this situation is expected to persist as the country faces increased pressures from rising social security costs, including pensions and healthcare, due to its aging population.
AMRO suggests that Japan needs to pursue a balanced approach by maintaining monetary flexibility while implementing fiscal reforms to address the growing fiscal deficit. Additionally, improvements in the labor market, such as increasing workforce participation rates and enhancing productivity, are crucial for supporting long-term economic growth.
Despite the challenges of high inflation and fiscal pressures, Japan’s economic growth forecast reflects optimism driven by structural improvements and external demand, although caution remains necessary in the face of potential economic headwinds.
