Revised Forecast of Japan’s Economic Growth Despite Below Inflation Target

Growth forecast of Japan was adjusted to 1.9 percent and 1.8 percent for this year and the following year, respectively. This was announced after a steady growth of domestic demand in the country, according to the cabinet office on Tuesday.

When it comes to consumer inflation, the estimated value of consumer inflation is at 0.7 percent in the recent fiscal year and 1.1 percent next year despite the inflation target of 2 percent, which remains a struggle amid a steady rate of economic growth.  

The Gross Domestic Product forecast was at 1.5 percent and 1.4 percent growth in 2017 and the next fiscal year, respectively.    

The steady pace of the economy was due to the high demand for export that supported the manufacturing sector. However, the low inflation remains a problem for policymakers which is in a conflict with the schemes of the Bank of Japan to end the massive quantitative easing program.  

The estimated figure of the government is higher than the central bank and some private-sector economists. It’s the opposite for forecast for the inflation data wherein the government gives a more toned down figure than the central bank’s estimate.

The nominal economic growth forecast from the cabinet office is at 2.0m percent for the present fiscal year and 2.5 percent in the next starting on April 1. A bigger estimate is in line with the expectations for a higher tax revenue from the government.

Numbers related to growth will be a factor for the tax revenue and aggregate in drafting the budget for next year, which is said to be announced on Dec 22 by the cabinet. This is already expected following the economic projection in the next fiscal year in December in assessing the annual budget and revise in the middle of the year.