The Japanese economy may already be in technical recession, but we expect the downturn to be relatively short-lived and shallow. Sharp falls in inflation will boost real incomes, while Japan has avoided the fundamental economic and financial imbalances that threaten to drag the US and the UK into a prolonged recession. Overall, we expect GDP to grow by around 0.5% this year and 0.8% next year, which would make Japan the only major economy to record stronger growth in 2009 than in 2008.
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