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By APD writer Alice
The Japanese economy will grow 1.4% in the next fiscal year thanks to a 26 trillion yen ($238 billion) stimulus package that has been approved by the cabinet earlier this month, the government forecast.
The rate marked an upgrade from the government’s previous growth forecast of 1.2% made in July. The government kept its estimated 0.9% growth for the current fiscal year ending in March 2020.
The economic growth forecast will be used as a basis for the government to estimate tax revenue when drafting the budget plan for the next fiscal year that will begin in April next year.
Prime Minister Abe Shinzo's cabinet recently approved a spending plan of up to 102,660 billion yen. Accordingly, capital spending is expected to rise by 2.7%, higher than the 1.9% increase projected previously, as businesses are promoting investments to help save labor.
Consumer spending growth, which accounts for more than half of Japan's economy, is expected to remain unchanged at 1% despite the increase in consumption tax from 8% to 10% from October 1.
Exports are estimated to increase by 2.4%, while imports may go up 3.1%. As a result, net exports will be negative, causing the country’s GDP to drop by 0.1 percentage points.
The Japanese cabinet has just passed a stimulus package to boost the economy in the context that Japan is facing many challenges such as weak overseas demand and the impact of the aforementioned consumption tax increase. The private sector funds nearly half of this stimulus package.
The Japanese government predicts that the stimulus programme will increase its real GDP by about 1.4% in the three years to the fiscal year of 2021. Meanwhile, nominal GDP, or GDP yet to be adjusted for inflation is expected to increase 2.1% to 570.2 trillion yen, higher than the forecast of 2% made in July.
Japan’s economy expanded at an annualized 1.8% in the third quarter because of stronger consumer and business spending, but analysts expect a contraction in the current quarter due to the increasing external and internal pressures.
(ASIA PACIFIC DAILY)
