The government projected Tuesday that Japan’s economy will return to a pre-coronavirus pandemic level later this year, expecting further acceleration of domestic vaccine rollouts and a strong recovery of the world economy to help it pick up faster.
The Cabinet Office forecast the nation’s real gross domestic product to grow 3.7% in fiscal 2021 from the previous year to ¥546.0 trillion, which is slightly larger than the ¥545.3 trillion predicted in January.
In the January estimate, the government had said Japan’s economy would recover to its pre-pandemic level in fiscal 2021, which ends in March next year.
A government official told reporters that Japan’s GDP in the latter half of 2021 is expected to reach the pre-pandemic level marked in the October-December period of 2019 as the pace of recovery will pick up.
Although the estimate for the fiscal 2021 GDP growth rate was downgraded from the previous forecast of 4.0%, if realized the 3.7% growth would still mark the fastest expansion since comparable data became available in fiscal 1995, the official said.
The official noted the projected GDP growth in fiscal 2021 was revised downward because the economic contraction of 4.6% in fiscal 2020, the worst GDP decrease on record, was better than a 5.2% shrinkage previously projected by the government.
By component, private consumption will increase 2.8% as spending in the service sector is expected to recover in line with progress in the vaccine rollout, while exports will soar 14.9% boosted by a solid recovery of the world economy, according to the estimate.
For fiscal 2022, the government predicted the economy to grow 2.2% in real terms. In that case, Japan’s GDP will hit its highest-ever level, the official said.
In nominal terms, or unadjusted for inflation, the Japanese economy will likely expand 3.1% in fiscal 2021 and 2.5% in fiscal 2022, the government said.
The projections will be used as the basis for the government’s tax revenue estimate when it compiles a draft budget for fiscal 2022.
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