Deutsche Bank AG(US:DB)2025-08-25 01:38Summary of Deutsche Bank Group Research on Japan Economic Perspectives Industry/Company Involved - Industry: Japanese Economy - Company: Deutsche Bank Group Key Points and Arguments Economic Growth Forecasts - The growth forecast for fiscal 2025 has been revised upward from 0.6% to 1.0% due to improved GDP figures for 2Q 2025, which recorded a real GDP growth rate of 1.0% saar, surpassing the market consensus of 0.3% [4][5] - The forecast for fiscal 2026 has been revised downward from 1.1% to 0.9% [4][5] - Growth forecasts continue to exceed consensus estimates [5] Tariff Negotiations and Economic Impact - Reciprocal tariffs with the US will be raised to 15%, while tariffs on automobiles will be lowered [4][9] - The impact of the US tariff increase on the real economy has been limited so far, with no significant change in export volumes to the US despite a 25% tariff on automobiles [10] - The expected impact on growth rates from the tariff changes is a reduction of -0.1% for fiscal 2025 and 2026 [9] Inflation and Consumption Trends - Despite high inflation exceeding 3%, real private consumption is on a moderate upward trend, primarily due to increases in real employee compensation [15] - Real employee compensation remains below pre-pandemic levels, with a significant negative real wage gap of about -4% in 2Q 2025 [15][23] - Inflation is expected to decelerate moderately but is unlikely to fall significantly below 2% [23] Political Landscape and Monetary Policy - The political situation, particularly regarding the Liberal Democratic Party (LDP) presidential election, will influence future economic measures and monetary policy [34][38] - An interest rate hike by the Bank of Japan (BoJ) is expected in October, contingent on the political landscape [46][47] - The BoJ's stance on interest rate hikes is not expected to change significantly unless Takaichi becomes prime minister [46] Fiscal Policy Uncertainty - There is high uncertainty regarding future economic measures, with assumptions of a supplementary budget similar to last year (approximately 15 trillion yen) [34] - The potential for increased defense spending sought by the US government is not reflected in the current economic outlook [34] Employment and Wage Dynamics - The number of employees has increased at an annual rate of about 0.7-0.8%, contributing to the rise in real employee compensation [15] - The recovery in real employee compensation in Japan is notably weaker compared to other major countries [15][24] Long-term Economic Policy Trends - Regardless of political outcomes, long-term trends in economic policy are expected to continue, focusing on a shift from monetary policy to fiscal policy and from corporate-oriented to household-oriented policies [42][45] Other Important Content - The presence or absence of a change in the LDP president will affect cooperation with opposition parties, which is essential given the lack of a majority in both houses [42] - The upcoming political events and economic data releases are likely to influence the BoJ's policy stance [48]