Boston, MA -- (SBWIRE) -- 02/13/2014 -- Growth Still Expected To Slow In 2014

Despite some positive signs, BMI remains rather downbeat about Japan's economic prospects. Prime Minister Shinzo Abe's three policy 'arrows' raised expectations in 2013, but we do not think the initial impetus created is sustainable into 2014. The first two arrows - aggressive monetary and fiscal stimuli - played their part, but the third, a combination of industrial reform and revitalisation, appears still to be tied up in legislative negotiation. Despite strong encouragement from the government, a recent Yomiuri survey found that only one third of companies were considering boosting wages, and those that were, were boosting one-off bonuses rather than base pay.

After strong quarter-on-quarter GDP growth of 3.7% in Q213, there was a sharp slowdown to 1.9% in Q313. We have raised our estimate for GDP growth in 2013 to 2.4%, reflecting the slower-than-expected winding down from the initial boost from 'Abenomics'. But given our expectation of slower private consumption growth, private sector investment caution and sluggish net exports, all against a background of continuing fiscal and debt pressures, we are continuing to predict GDP expansion at a modest 1.3% in 2014. The fact that Tokyo has been selected for the 2020 summer Olympics provides some medium-term upside, but even here we are cautious about the ability of capital spending on the games to lift Japanese growth above trend.

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The immediate outlook for the freight sector is still limited by relatively slow economic growth. After sharp reductions in capacity, All-Nippon Airways (ANA) and Japan Airlines (JAL) - the country's two main airlines - are making profits again (albeit smaller because of adverse currency movements) and reporting some moderate monthly increases in airfreight carried. There are signs that the country's automobile exports are set to rise, boosting shipping companies active in this specialised area.

Headline Industry Data

- Air freight tonnes forecast to grow by 2.0% in 2014 to 3.241mn tonnes, marking a slowdown on 2013 growth of 3.1%.
- Road freight tonnes hauled in 2014 forecast to grow 1.8% to 4.709bn tonnes, with average annual growth at 1.4% through to 2018.
- Rail freight tonnes will increase by 0.4% in 2014 to 41.224mn tonnes. We project average annual growth of 0.9% during our forecast period, marginally slower than GDP.
- Port of Tokyo 2014 tonnage throughput forecast to grow 1.6% to 88.334mn tonnes, with average annual growth of 1.5% during our forecast period to 2018.
- Port of Nagoya 2014 tonnage throughput forecast to grow 2.5% to 216.646mn tonnes, with average annual growth of 2.8% over the medium term.
- The real value of Japanese trade will grow by 3.5% in 2014, slower than the 4.0% we estimate for 2013. Exports will grow by 3.0%, behind imports, which will gain 4.0%.

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