News ID: 236017
Published: 1052 GMT December 18, 2018

Japan cuts 2019 growth forecast on weaker capital spending

Japan cuts 2019 growth forecast on weaker capital spending
TOMOHIRO OHSUMI/BLOOMBERG

Japanese government on Tuesday cut its domestic growth forecast for fiscal 2019, citing weaker than expected capital spending amid a slowdown in the global economy.

The Cabinet Office said gross domestic product, the total value of goods and services produced in the country, is expected to grow 1.3 percent in real terms in the year ending March 2020, a downgrade from the July forecast for 1.5 percent growth, japantimes.co.jp wrote.

The projection will be used as the basis for the government’s tax revenue estimates as it compiles the budget for the year ending March 2020. Prime Minister Shinzo Abe’s Cabinet is slated to approve a draft of the budget Friday.

The latest outlook would still represent an expansion from the 0.9 percent that the government estimates for fiscal 2018, despite the consumption tax hike slated for next October.

The forecast for the current fiscal year was cut from 1.5 percent after taking into account the series of natural disasters that struck the country during the summer.

In nominal terms, or unadjusted for inflation, the world’s third-largest economy is expected to grow 2.4 percent to ¥566.1 trillion in fiscal 2019, downgraded from the July forecast for 2.8 percent growth.

Capital spending, which has shown robust growth in recent years on the back of strong corporate profits and labor-saving investment amid a severe shortage of workers, will likely increase a real 2.7 percent, the government said. This is down from the earlier forecast of 3.4 percent growth, as the global economy is likely to slow down.

Private consumption, which accounts for more than half of Japan’s economy, was projected to grow 1.2 percent, unchanged from July. The impact of the consumption tax hike scheduled for Oct. 1 will be offset by fiscal stimulus designed to underpin demand, a government official said.

Exports are expected to increase 3.0 percent despite a slowdown in demand for smartphones in Asia and heightened trade tensions between the United States and China.

The government meanwhile lowered its inflation forecast for fiscal 2019, underscoring the Bank of Japan’s struggle to lift prices through monetary easing.

Consumer prices including energy and fresh food are likely to climb just 1.1 percent, compared with the earlier projection for a 1.5 percent increase.

 

 

 

   
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Resource: japantimes.co.jp
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