The World Bank said Thursday it has lowered slightly its projection for Japan’s economic growth in 2007 to 2.3 percent, while indicating the world’s second-biggest economy might still face volatile factors, including the continued sluggish consumer spending seen in 2006 despite an roved labor market.
The figure, released in the Washington-based bank’s semiannual “East Asia and Pacific Update,” compares with a growth estimate of 2.4 percent in the previous report, issued in November. The latest report puts Japan’s 2008 growth projection at 2.4 percent.
The Japanese economy, measured by gross domestic product, grew 2.2 percent in 2006, sharply lower than the 2.9 percent growth projected by the World Bank in November.
“Growth in Japan was unexpectedly volatile over the course of 2006,” the international lending institution said in its latest report, attributing the gap between projected and real growth to an “unexpected downturn” due to such factors as lower public investment, companies’ inventory adjustments and a slowdown in export growth.
It indicated that those volatile factors might remain to some extent, also pointing to weak consumer spending in the second and third quarters of 2006 “despite the best labor market conditions in more than a decade.”
But the report said the Japanese economy staged an “even more unexpected rebound” in the fourth quarter of 2006, expanding at an annualized rate of 5.5 percent on strong growth in business investment and consumer spending.
The recovery has bolstered confidence that the economy can withstand monetary tightening, allowing the Bank of Japan to increase its policy interest rate by 0.25 percentage point to 0.5 percent in February, it said.
In the report, marking 10 years since the Asian currency crisis in 1997, the World Bank said the region is now much wealthier and has fewer poor people.
“Led by continued strong growth in China, Emerging East Asia now has an aggregate output of over $5 trillion, double the dollar value just before the crisis,” it said.
The World Bank maintained its 2007 growth projection for emerging East Asia, which excludes Japan, at 7.3 percent from the November estimate. But this marks a slowdown from 8.1 percent in 2006.
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