Japan’s nominal GDP is projected to contract this year before rebounding above 4 percent in 2026, per Morgan Stanley’s forecast.
Morgan Stanley forecasts Japan’s nominal GDP will decline slightly in 2024 due to energy price shocks but expects a rebound to over 4 percent growth by 2026. The drag stems from terms-of-trade losses and higher oil costs, though government subsidies have softened the impact on households.
Producer prices surged 4.9 percent year-on-year in April, with further increases anticipated from supply disruptions in construction and industrial sectors. A structural labor shortage is expected to sustain wage growth, particularly among younger workers, supporting medium-term consumption.
The bank reaffirms its bullish stance on Japan, setting a TOPIX target of 4,300 and favoring it over broader emerging markets. Earnings upgrades are concentrated in materials, semiconductors, and defense, while consumer sectors face downgrades.