In a recent review of economic forecasts, Japan’s government has revised down its growth outlook for the current fiscal year while predicting inflation to surpass the central bank’s target. This reflects a shift in the country’s deflationary mindset.
The government now expects the economy to expand by 1.3 percent in the fiscal year ending in March 2024, compared to the previously projected 1.5 percent in January. For the following fiscal year, a growth rate of 1.2 percent is predicted.
Although slowing exports may hinder growth, there are expectations of a recovery in consumption, particularly in the services sector. Additionally, capital expenditure is anticipated to increase.
Overall consumer inflation, which includes all items, is projected to reach 2.6 percent in this fiscal year, surpassing the initial forecast of 1.7 percent in January and exceeding the Bank of Japan’s 2 percent target. In fiscal 2024, inflation is expected to reach 1.9 percent.
These estimates are released ahead of the Bank of Japan’s upcoming policy meeting, where the board will present its fresh quarterly projections and discuss the economy’s progress in meeting the 2 percent price target sustainably.
In its latest forecasts from April, the central bank predicts core consumer inflation, which excludes fresh food costs, to reach 1.8 percent in the current fiscal year and 2 percent in the following year.
BOJ Governor Kazuo Ueda has dismissed the possibility of an immediate departure from ultra-loose policy, stating that the recent inflation driven by rising costs must be replaced by price gains stimulated by strong domestic demand and higher wage growth.
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