Long-term economic outlook for Japan, as impacted by COVID-19

Due to COVID-19, Japan’s GDP decreased by 4.5% in 2020 from 0.7% in 2019. The economy increased by 1.7% in 2021, stagnated at 1.4% in 2022, and is expected to grow at 1.8% in 2023 and to slowdown to 0.9% in 2024, based on the January 2023 forecasts of the International Monetary Fund (IMF). IMF’s January 2023 report is based on inflation peaking with low growth due to rising interest rates. In January 2021, a year into the COVID-19 pandemic period, the IMF was hopeful, predicting a V-shaped growth pattern of 3.1% for 2021 and 2.4% for 2022 due to policy stimulus and the availability of vaccines. However, this did not materialize due to various geopolitical and economic shocks. The economic costs of the COVID-19 pandemic relative to its absence are estimated to be at least US$1.1 trillion (¥160 trillion) until 2030 under a continued low economic growth future path. Moreover, the estimated US$1.1 trillion economic loss is equivalent to the erasure of approximately 30% of GDP produced in 2019 during the Abenomics era. If in the absence of the pandemic, the economy was assumed to have a high growth, the losses would reach US$ 4.8 trillion (¥706 trillion) due to the lost opportunity of a high-growth counterfactual trajectory.