Revised projections by several private think tanks show that many of them believe the economy will expand by about 2 percent during this fiscal year, greater than the government target of 1 percent growth in real terms.
Economic research institutes, including Daiwa Institute of Research, Nomura Research Institute and Mitsubishi Research Institute, revised upward their initial estimates on the grounds that strong demand for products and services related to IT will substantially stimulate corporate capital spending and personal consumption. This will offset the expected drop in public works spending in the latter half of the fiscal year.
Of the institutes, Daiwa had the rosiest projection — 2.8 percent growth for the year that ends in March. The new figure assumes the government’s planned economic stimulus package will go ahead, with fresh spending estimated at 2 trillion yen.
Nomura Research Institute said in its report that Japan is no longer in danger of a financial crisis because potential losses from soured loans have been reduced to levels that can be covered by major banks’ operating profits, or by their unrealized profits from stockholdings.
For fiscal 2001, most of the institutes said the nation’s economic growth will probably fall short of this year’s level because the global economy is expected to slow down.
Sumitomo-Life Research Institute made the smallest gross domestic product growth projection of the nine at 1.5 percent. It also forecast a GDP rise of 0.9 percent for the next fiscal year.
Nikko Salomon Smith Barney, however, said the economy will grow 2.6 percent in fiscal 2000 amid expectations of a continued gradual recovery in consumption.
The forecast was the same as Nikko Salomon’s previous estimate in June, but the firm lowered its growth projection for fiscal 2001 to 2.5 percent from 2.6 percent.
“The solid corporate sector recovery is beginning to support personal consumption,” which was the biggest source of concern for Japan’s economic outlook, Nikko Salomon said.
Moderate structural improvements in Japan’s economy “should allow the private sector to survive the inevitable shift to sustained fiscal consolidation,” it said.
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