The government on Monday sharply raised its forecasts for economic growth in fiscal 2013 to 2.5 percent and 2.7 percent in real and nominal terms, respectively, predicting that the stimulus package will spur domestic demand as the global economy bounces back.
The consumer price index is likely to gain 0.5 percent in fiscal 2013, marking its first rise since fiscal 2008, following a 0.1 percent decline estimated in fiscal 2012, the government said.
Economic and fiscal policy minister Akira Amari said at a press conference that the forecasts “can be achieved” because the stimulus package, worth ¥20 trillion, is expected to begin producing results over the next year or so.
Finance Minister Taro Aso expressed optimism about the outlook for Japan’s economy, telling a separate news conference that it could attain higher growth because the downside risks to the global economy are “receding.”
A weaker yen could boost exports, improving corporate performance and increasing business investment, which also contributed to the upward revision from a real 1.7 percent rise and a nominal 1.9 percent expansion, estimated in August, a Cabinet Office official said.
If the projections are realized, the rate of nominal gross domestic product growth would top the real, or inflation-adjusted, rate for the first time in 16 years. Under these circumstances, the Cabinet of Prime Minister Shinzo Abe could expect the end of deflation to come within sight in the next fiscal year starting April.
The Cabinet Office, however, said the possibility lingers that the pace of economic growth and price rises in the world’s third-largest economy could be slower than expected due in part to the aftermath of the European sovereign debt crisis and a possible power supply shortage at home.
In fiscal 2012 through March, the economy would expand 1.0 percent in real terms and 0.3 percent on a nominal basis, before to adjustment for price changes, it said.
The growth forecasts will be used for the government’s tax revenue estimates, a basis for its new budget compilation. The Cabinet, formed on Dec. 26, is slated to approve the fiscal 2013 initial budget on Tuesday for submission to the ordinary Diet session convened Monday.
The government projects corporate capital spending will increase a real 3.5 percent in fiscal 2013, up from a 0.7 percent fall in fiscal 2012.
Consumer spending is forecast to expand 1.6 percent, compared with a 1.2 percent rise, as demand for durable goods and housing could grow before a planned sales tax hike to 8 percent from the current 5 percent in April 2014, the government said. Housing investment is expected to rise 6.8 percent, following a 3.1 percent gain.
Exports are projected to surge 7.0 percent from a 2.5 percent decline, while imports would jump 6.8 percent, compared with 2.0 percent growth in fiscal 2012, suggesting the country’s trade balance would improve slightly.
The government now anticipates that the dollar will average ¥87.8 in the next fiscal year, rising from ¥81.9 in fiscal 2012.