Japan forecasts slowing economic growth in 2011 fiscal year
2010-12-22 15:25:10
Japan's economic growth will slow to 1.5 percent in fiscal 2011 from 3.1 percent in the current fiscal year, as consumption further wanes following the expiration of special subsidies and exports fall on slipping demand and a strong yen, the Cabinet Office said in a report on Wednesday.
"We need to keep a close eye on any possible slowdown in overseas economies and swings in the foreign-exchange rate," the government report said.
"We will continue to take bold action including currency intervention when necessary, given that an excessively strengthening yen and its prolongation risk damaging economic and financial stability," said the outlook.
According to the report, overall consumer prices are projected to show 0 percent growth in the next financial year, marking the first time in three years that the consumer price index (CPI) moved out of negative territory.
Recent year-on-year falls in the consumer price index will halt in the middle of next year, the report said, but the government indicated that this would not necessarily mean Japan's struggle against lingering deflation would finally be over.
Regarding the employment situation in Japan, the Cabinet Office said that job growth will help the unemployment rate decline to 4. 7 percent next fiscal year from a projected 5 percent in the year ending March.
Improvements are expected in employment and incoms, which will support domestic demand, the report said, providing further support for consumer prices.
Economists have said the Japanese economy will likely contract in the current quarter as the expiry of stimulus measures targeting environmentally-friendly vehicles has lessened domestic demand and demand for Japanese goods from the U.S. and China, Japan's biggest trading partners are also cooling off, economists noted.
However, the Cabinet Office predicts that as overseas economies pick up steam, Japan's will follow suit in the next fiscal year on rising demand for Japanese goods, although noted that a strengthening yen or double-dip recessions in key global economies would hamper Japan's economic growth.
The Cabinet Office issues economic forecasts in December for the coming fiscal year, providing the basis for the government to compile its annual budget and predict tax revenue for next year's budget. The forecasts are revised halfway through the following year.