TOKYO • Japan's government has raised its economic growth forecast for the next fiscal year, thanks to its latest stimulus package aimed at speeding up recovery following the damage wrought by the coronavirus pandemic.
The economy is expected to grow 4 per cent in price-adjusted real terms in the next fiscal year starting next April, the latest estimate by the Cabinet Office showed yesterday.
Its previous forecast, made in July, was growth of 3.4 per cent.
The upgrade was underpinned by the government's third supplementary budget, which was approved earlier this week, to fund the US$708 billion (S$940 billion) stimulus package to help the economy recover from its Covid-19-induced slump in the second quarter.
The forecast 4 per cent growth for the next fiscal year would be the fastest annual expansion on record, if realised, since comparable data became available in 1995.
The government, which expects the economy to return to pre-pandemic levels by January to March 2022, also cautioned about risks.
Policymakers need to keep a close watch "on downside risks to the economy in Japan and overseas from the pandemic and impacts from moves in financial capital markets", an official at the Cabinet Office said.
The government will use the forecasts to finalise the state budget for the next fiscal year.
For the current fiscal year that ends next March, the government cut its gross domestic product forecast to a 5.2 per cent contraction, which would be the biggest annual slump on record.
Previously, it projected the economy to shrink 4.5 per cent.
Consumer prices remain subdued due to weak domestic demand and the government's discount travel campaign to support the tourism industry.
Overall consumer prices are forecast to fall 0.6 per cent for this fiscal year, from a 0.3 per cent decline expected previously.
In fiscal 2021, overall prices will grow 0.4 per cent, the government said, revised from the previous forecast of a 0.5 per cent increase.
Meanwhile, official data released yesterday showed that Japan's core consumer prices last month dropped at their fastest pace since late 2010, weighed down by the travel discount campaign and weak energy prices, raising fears of a return to deflation.
Nationwide core consumer prices, which exclude volatile fresh food costs, fell 0.9 per cent last month from a year earlier, matching a median market forecast.
It was the fourth straight month of decline and the fastest pace of year-on-year drop since September 2010, the data showed.
The discount travel campaign to boost domestic tourism weighed on accommodation fees while weaker energy costs also pushed down consumer prices.
Overall consumer spending remained subdued as people refrained from dining out and shopping.
REUTERS
