Japan government lifts economic growth estimates for fiscal 2023/24

TOKYO – Japan’s government on Dec 21 slightly raised its economic growth projections for this fiscal year from its previous estimates, as external demand is likely to more than offset weak domestic consumption, the Cabinet Office said.

In the twice-yearly economic outlook, the real economic growth rate for fiscal 2023/24 is estimated at 1.6 per cent, up from 1.3 per cent seen half a year ago as external demand contributed 1.4 percentage points to overall growth, due to a recovery in inbound tourism and car output. Car manufacturing had been hit earlier by chip shortages.

The economic growth rate is forecast to slow down slightly to 1.3 per cent in the fiscal year starting in April 2024 as external demand contribution weakens sharply, reflecting a rebound in domestic consumption.

The fiscal 2024 economic growth projection is slightly higher than the previous estimate of 1.2 per cent.

Domestic demand is expected to rebound in the next fiscal year with the help of planned income tax cuts on top of the ongoing trend of wage hikes, a Cabinet Office official said.

The government projections were a little rosier than forecasts from private sector economists, who expect the world’s third-largest economy to grow 1.5 per cent this fiscal year and 0.9 per cent the next.

The growth projections provide the basis for government policy, such as the annual budget for the coming fiscal year.

Overall consumer prices are forecast to rise 3 per cent this fiscal year, taking energy subsidies that cut 0.6 percentage points off inflation into account.

The growing ability of companies to pass on costs to customers backs the trend of price hikes, the official said.

Overall inflation is seen slowing down to 2.5 per cent for the next fiscal year as the effects of energy subsidies fade away, according to government projections.

Nominal gross domestic product (GDP) is projected to rise 5.5 per cent this fiscal year and 3 per cent next, bringing the amount of nominal GDP to a record 615 trillion yen (S$5.7 trillion) in fiscal year 2024, it said. REUTERS