Japan’s efforts to move its growth out of low gear have suffered a further setback, with the economy now expected to expand by only 0.9% in the year to next March against a projected 1.7% at the start of 2016.
The Japanese government also reduced its inflation forecast for the fiscal year to 0.4% from 1.2% previously, citing increased uncertainties over the global economy and subdued domestic consumption and business spending for the downgrades.
In addition, an anticipated boost to demand in order to avoid a hike in consumption tax has not materialised. The tax was originally increased from 5% to 8% in April 2014 and a further rise to 10% – originally due to be introduced last October – has been steadily put back. Having been rescheduled to April 2017, it will now not take place before October 2019.
For the year ending March 2018 the government expects Japan’s economy to grow by 1.2%, while the inflation rate will edge higher at 1.4%.
Agreeing the new forecasts, the economic and fiscal policy council of prime minister Shinzo Abe also confirmed plans to announce a new economic stimulus package later this month. Likely to include further monetary stimulus by the Bank of Japan (BoJ), it follows Abe’s decisive victory last Sunday in Japan’s Upper House elections.