BMI View: We maintain our weak consumer outlook in Japan on the back of tepid consumption growth.
Despite robust real wage growth, rising inflation will dampen consumption, exacerbating priceconsciousness in Japanese consumers. Nonetheless, over the medium term headline consumption growthwill outstrip economic growth due to favourable labour market conditions.
We hold a subdued outlook for consumption in Japan due to rising inflation. We forecast privateconsumption real growth at 1.7% over 2017 - from 0.4% in 2016 and above the annual average growth rateof 0.9% between 2000 and 2014. Low and stable unemployment will buoy consumption growth over 2017as favourable labour market conditions will support real wage growth. However, rising inflation willdampen real wage growth, which will then undermine real purchasing power and weigh on consumptiongrowth.