Japan’s economic growth forecast for the 1997 calendar year has been revised downward to 1.1 percent from April estimates of 2.2 percent, the International Monetary Fund said Sept. 17.
In its semiannual World Economic Outlook report, the IMF also projected 2.1 percent growth for calendar 1998, lower than its April figure of 2.9 percent. At the same time, the nation’s current account surplus was expected to make up 2.3 percent of gross domestic product in 1997 — 0.5 percent greater than April estimates.
In contrast, the growth for the United States in 1997 was put at 3.7 percent, up from the spring figure of 3 percent. Growth for Germany remained unchanged at 2.3 percent.
While the Japanese economy strengthened from late 1996 to early 1997, helped by a rise in domestic demand, the two-percentage point rise in the consumption tax April 1 led to a fall in economic activity during the April-June quarter, the report says. However, a recovery was expected in the latter half of the year, bringing the annual growth rate to about 1.1 percent, according to the IMF.
If the economy does not take a turn for the better in the latter half of 1997, the Japanese government may have to consider the implementation of “some fiscal measures” to support the economic recovery, the report says. Given uncertainties such as the effects of the consumption tax increase, authorities were expected to maintain the current easy money policy until recovery was firmly established, it continues.