2022 Economic Forecast

With Prime Minister Fumio Kishida at the helm, reform is accelerating in piecemeal steps, rather than a radical approach. His stimulus puts emphasis on handouts, SMEs, the revival of the chip industry, fuel subsidies, domestic travel, and corporate talent development. With a new generation of corporate leaders, employment qualities have improved greatly, according to Jesper Koll, Executive Director at Monex Group Japan, where 1 in 5 companies have committed to increase wages by more than 2.5%. The International Monetary Fund projects Japan’s GDP will increase by 3.2%.

Kishida remarked about security and diplomacy, perhaps the two key words to monitor in 2022. According to the Japan Times, there has been increasing danger involving cyber attacks including ransomware and hacks of critical infrastructure, supply chains, disinformation, and the pandemic itself. Regarding security talks, Japan has been in close relations recently with Australia, India, and the U.K. They continue to express mutual distrust with South Korea ever since the dispute regarding the islets of Dokdo.

With attention to China, the U.S. and Japan plan to bear security challenges and discuss deterrence capabilities over numerous meetings and forums with other countries in the months ahead, such as the Quadrilateral Security Dialogue.

Japan also agreed to a 5% increase in U.S. military hosting, part of the record-high 5.4 trillion yen (roughly $47 billion) defense budget approved by the Cabinet for fiscal year 2022. The budget stresses particular importance on defense and research spending, from unmanned aircraft, rail guns, and satellites.

The Japanese government is also expected to publish a new National Security Strategy (NSS), which has not been revised since 2013. The document will be given in three parts, and will assess national, economic security, including plans and expenses for the next five years.

According to a Kyodo News survey conducted from November to December, the workforce has expressed optimism. Among the 106 companies in Japan, 84% believe there will be economic growth in 2022, compared to 74% last year.

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