Japan—Structural reforms buoy growth outlook

Structural reforms are helping to revive growth in an economy that is Australia’s second-largest trading partner.

Japan’s economy has been acutely affected by the world economic slowdown. Among the drags on its performance are the rapidly ageing population (expected to reduce Japan’s workforce by 20% in the next two decades), and high government debt (234% of GDP) that could become unsustainable. The increase in the consumption tax in October 2019 should help support government finances, but will also weigh on domestic spending and the economy.

The key to overcoming these challenges is structural reform. There has been some progress of late, with legislation passed to address excessive overtime work and improve the treatment of non-regular workers. But recent analysis by the International Monetary Fund highlights several outstanding areas for reform.