March 2024 was a crucial month for the Japanese economy. First, Japan’s largest companies gave union workers the biggest pay raise in more than three decades. Shortly thereafter, the Bank of Japan ended its long-standing policy of negative interest rates and yield curve control.

Rising wages and the end of negative interest rates, originally introduced to stimulate inflation in a stagnating economy, are positive signs for the Japanese economy. Susanna Campagna of the EDC’s Economic and Policy Information Center predicts that growth will remain stable but moderate.

“Japan’s gross domestic product (GDP) grew by about 1.9% per year between 2019 and 2023, and we expect annual growth of 1% over the next five years,” she continues. This growth rate is modest, but is supported by higher domestic consumption rates, including increased demand for services and private investment. The weak yen is also supporting Japan’s tourism boom and greater export strength. »

What does this mean for Canadian exporters and investors? Japanese consumers have more money in their pockets, but the country’s demographic reality remains a challenge. “Japan’s aging and shrinking population could impact the country’s growth potential in the medium to long term, along with persistent labour shortages in some sectors that continue to hamper business growth and expansion,” says M^Me Campania.

At the same time, these trends are also creating opportunities in key sectors as Japanese consumers, businesses and investors seek innovative products and services to make their economies greener, more efficient and safer.