Japan raises economic growth forecast for FY20

O Upgrades projection to 1.4% from 1.2% previously, sees slow progress on ending deflation

TOKYO: Japan’s government raised its economic growth forecast for the next fiscal year, helped by an expected boost from a US$122 billion (RM505 billion) fiscal package that would help cushion the hit from weaker global demand.

The economy is now expected to expand 1.4% in price-adjusted real terms in the fiscal year starting April 2020, according to the Cabinet Office’s projections, approved by the Cabinet yesterday.

That marked an upgrade from the government’s previous forecast of 1.2% growth issued in July. The government kept its estimated 0.9% growth for the current fiscal year ending in

March 2020.

The upgrade largely stemmed from an improvement in domestic demand due to stronger corporate investment and a boost to growth from public spending from the fiscal package approved by the Cabinet this month.

The government expects capital spending to grow a robust 2.7% next fiscal year, compared to 1.9% in the previous assessment in July.

The government’s projections come as the Bank of Japan (BOJ) is expected to keep monetary policy on hold today as the fiscal package and progress in USChina trade talks take some immediate pressure off the central bank to support growth.

The Cabinet Office projected overall consumer inflation, which includes volatile fresh food and energy costs, at 0.6% for this fiscal year and 0.8% for the following year – remaining far from the BOJ’s elusive 2% price target.

Japan’s economy expanded at an annualised 1.8% in the third quarter. For fiscal 2019 and fiscal 2020, the Cabinet Office forecast nominal economic growth of 1.8% and 2.1%, respectively.

In another development, former BOJ executive Hideo Hayakawa said Japan’s economy may already be in mild recession and will rebound only modestly next year, forcing the central bank to maintain its huge stimulus despite the rising costs,

Given its dwindling ammunition, the BOJ is likely to hold off on expanding stimulus unless an external or market shock deals a more severe blow to the economy, said Hayakawa, who retains close contact with incumbent central bank policymakers.– Reuters