The government has slashed its domestic economic growth projection for this fiscal year because an anticipated purchasing surge did not materialize after the second stage of a consumption tax hike was postponed.
Given Wednesday’s reassessment, the government now expects the economy to grow 0.9 percent in real terms in the year through March from the previous year, down from 1.7 percent forecast in January.
“Uncertainty over the global economy has increased, while the domestic economy lacks strength in the private sector from factors like private consumption and business investment,” the Cabinet Office said in a document presented to a government policy panel.
As for future risks, the office pointed to an uncertain outlook following Britain’s decision to leave the European Union and a slowdown in China and other emerging economies.
The forecast excludes the effect of stimulus measures to be compiled by the government this month, the Cabinet Office said.
In nominal terms, the government expects the economy to grow 2.2 percent in fiscal 2016, down from an earlier projected 3.1 percent.
For fiscal 2017, it projects the economy to grow 1.2 percent in real terms and 2.2 percent in nominal terms.
The projection came after Prime Minister Shinzo Abe decided to further postpone the sales tax increase to October 2019 from April 2017, citing the need to spur the economy as part of efforts to mobilize all policy tools to avert a global economic crisis.
At a meeting of the Council on Economic and Fiscal Policy on Wednesday, private-sector representatives proposed that the government use part of the around ¥1.7 trillion that came from a larger-than-expected tax revenue increase to fund policies aimed at enhancing welfare in the fiscal 2017 budget.
“We need to take steps, including making use of Abenomics’ achievements, so we can steadily implement policy steps,” Abe told the meeting.
Such policies include improving working conditions for employees working at nursing homes and child care facilities.
The prime minister also requested that his ministers make “utmost efforts” to lift the country’s minimum wage by 3 percent to boost disposable incomes.
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