1% real growth projected for next year

Kyodo, JIJI

The government expects the economy to grow around 1.0 percent in price-adjusted terms during fiscal 2014, assuming the consumption tax will be hiked to 8 percent next April, officials said Tuesday.

The pace of growth is expected to be slowed by the tax hike weighing down consumption while the impact of recent stimulus measures wear out, the officials said.

Prime Minister Shinzo Abe’s administration meanwhile plans to raise its forecast for fiscal 2013 economic growth to about 2.8 percent in real terms from 2.5 percent projected in January, with his policies dubbed “Abenomics,” entailing drastic monetary easing, helping shore up the economy.

Nominal gross domestic product is expected to grow around 2.7 percent in fiscal 2013, the officials said, which means the rate of nominal GDP growth would not top the real rate during the year, suggesting deflation may linger for some time.

The administration plans to present the economic outlook at a meeting of the Council on Economic and Fiscal Policy to be held early next month and submit it at a Cabinet meeting.

Abe has said that his government will make a final judgment this fall on whether to raise the consumption tax in April, while closely monitoring economic data and the possible effects of the tax hike on the economy.

Meanwhile, other sources said the government plans to underline the need to increase revenue by at least ¥13 trillion by fiscal 2015, the same amount to be raked in if the sales tax is raised from 5 percent to 10 percent by October 2015, in its upcoming medium-term fiscal plan.

But the fiscal plan for fiscal 2014-2016, to be drawn up in early August, will not specify how to secure the ¥13 trillion, as Abe has suggested the program would not be premised on the consumption tax increase to 8 percent in April 2014 in the first of the two-stage hike, the sources said.