Japan’s economy is likely to remain in a severe situation for the time being due to the impact of the COVID-19 pandemic, the Bank of Japan quarterly outlook report showed. The projected rate of the CPI is expected to be somewhat weak, affected by the virus cases, and a decline in crude oil prices, it added. While the impact of the virus is assumed to wane on a global basis through H2 2020, future developments are extremely unclear as they could change depending on the timing of the spread of the virus subsiding and on the magnitude of the impact on domestic and overseas economies.

The GDP is expected to shrink between -0.4 to -0.1% in fiscal 2019 (vs an earlier projection of 0.8 to 0.9%) and by -5 to -3% in fiscal 2020 (vs an earlier projection of 0.8 to 1.1%). The inflation forecast for fiscal 2019 is estimated to average 0.6% (vs an earlier projection of 0.6 to 0.7%), and that for fiscal 2020 is projected to average -0.7 to -0.3% (vs an earlier projection of 1 to 1.1%).