Domestic demand will pick up speed ahead of next year’s sales tax hike, extending one of Japan’s strongest runs of growth since the 1980s, and price pressures will strengthen. But weaker domestic demand after the tax hike means that GDP growth will slow sharply in 2020 and the threat of deflation will return. The Bank of Japan will have to guard against the risk of falling prices by keeping policy loose for the foreseeable future.
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