The International Monetary Fund on Tuesday lifted its 2023 growth forecast for Japan to 2 percent, up from its 1.4 percent prediction in July, citing "a surge in inbound tourism" as one of the major factors.
As more foreign travelers choose Japan as a holiday destination, drawn by their much-increased spending power due to the yen's recent weakness, the notable revision to the IMF's World Economic Outlook report is also attributed to pent-up demand, a pickup in auto exports and the impact of long-standing accommodative monetary policies.
After being hit hard by supply chain disruptions during the COVID-19 pandemic, Japan's auto and other export-oriented manufacturing industries have been recovering.
The number of foreign visitors, which this summer returned to about 85 percent of the level in 2019 before the outbreak of the coronavirus, is expected to increase further, given that there are some favorable developments such as China's removal of restrictions on Japan-bound group travel for its citizens in August.
However, the IMF left its forecast growth for the world's third-largest economy in 2024 unchanged at 1.0 percent.
As for the entire world, the Washington-headquartered institution kept its growth forecast for this year intact at 3.0 percent and revised it downward by 0.1 percentage point to 2.9 percent for 2024.
Both projections are lower than the 3.5 percent growth estimated to have occurred in 2022.
The reasons behind the latest forecasts include a slowdown in the Chinese economy offsetting continued robust growth in the United States.
Among major economies, the IMF said the United States has seen the strongest recovery. The country's 2023 projected growth of 2.1 percent was up 0.3 point from the previous report released in July.
The updated report revised upward its U.S. growth projection for next year to 1.5 percent from the previous 1.0 percent, as private consumption in the world's largest economy remains solid amid a historically tight labor market.
Meanwhile, China's growth estimate for this year was revised downward to 5.0 percent from 5.2 percent and for next year to 4.2 percent from 4.5 percent.
"China's growth momentum is fading," the IMF said, noting that the country is facing challenges such as "the property sector crisis" that has continued to push down housing prices and "elevated youth unemployment" that surpassed 20 percent in June this year.
It said those negative developments have undermined consumer confidence.
The euro area's growth is forecast to stay at 0.7 percent in 2023 and 1.2 percent in the following year, down 0.2 point and 0.3 point, respectively, from the previous projections.
The report, released ahead of the IMF and World Bank annual meetings in Marrakech, Morocco, said the euro area's economic recovery is not yet strong enough, partly because of greater exposure to Russia's war in Ukraine and a jump in the cost of energy imports.
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