Daily Management Review

Japan’s GDP Growth Forecast For Fiscal 20121 Raised Due To Stimulus Package


Japan’s GDP Growth Forecast For Fiscal 20121 Raised Due To Stimulus Package
The latest stimulus by the Japanese government to combat the novel coronavirus pandemic’s impact on its economy and to hasten the speed of the recovery prompted Japan's government to raise its economic growth forecast for the next fiscal year.
The latest estimate by the country’s Cabinet Office showed on Friday that the government now expected the economy to grow by 4.0 per cent in price-adjusted real terms in the next fiscal year starting April 2021.
The previous forecast by the government made in July was a growth rate of 3.4 per cent.
The third supplementary budget of the government, which was given approval earlier this week, was at the heart of the forecast upgrade. The latest budget is set to fund the $708 billion stimulus package to aid the recovery of the country’s economy from the Covid-19 induced shrinkage of the economy in the second quarter.
The Cabinet Office said that the government’s estimates of a 4 per cent growth for the economy next year, it achieved, would also be the fastest on record for Japan since the country started keeping records of comparable data in 1995.
However cautions about risks to the economy were also sounded by the government, which hopes that the economy will be able to reach its pre Covid-19 level of growth by January-March 2022 aided by the broad policy support.
An official at the Cabinet Office said that policymakers need to keep a close watch "on downside risks to the economy in Japan and overseas from the pandemic and impacts from moves in financial capital markets".
The forecasts will be used by the government to finalize the state budget for the next fiscal year.
The Japanese government also however cut down on its previous forecast for the current fiscal year that ends in March 2021 for the economy’s gross domestic product forecast to 5.2 per cent contraction which in turn will also be the biggest contraction in the history of the country.
The previous projection of the government was a contraction of 4.5 per cent for the current fiscal year.
Weak domestic demand and the discount travel campaign introduced by the government to support the tourism industry resulted in the country’s consumer prices remaining subdued. For the current fiscal year, the overall fall in consumer prices is expected to be 0.6 per cent compared to a previous estimate of a drop of 0.3 per cent.
The government said that there will be an overall growth of 0.4 per cent in consumer prices for the entire fiscal of 2021 which was slight downgrading to the previous forecast of the government of as growth of 0.5 per cent.