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Japan Reduces Its Fiscal Year GDP Growth Is Expected To Be 2% Due To A Drop In Global Demand

Japan Reduces Its Fiscal Year GDP Growth Is Expected To Be 2% Due To A Drop In Global Demand
Japan's government cut its economic growth prediction for this fiscal year, citing falling foreign demand, Russia's war in Ukraine, China's tight COVID-19 lockdowns, and a weaker global economy.
The prediction, which serves as the foundation for the state budget and the government's fiscal policy, includes substantially higher wholesale and consumer inflation estimates as rising energy and food expenses, as well as a weak yen, drive up prices.
According to Cabinet Office predictions provided before the Council on Economic and Fiscal Policy - the government's top economic body - the world's third-largest economy is now predicted to expand roughly 2.0 per cent in price-adjusted real terms in the fiscal year ending in March 2023.
This was a significant decrease from the government's earlier prediction of 3.2 per cent growth issued in January. The reduction was mostly due to decreased exports, which the government forecasts to rise 2.5 per cent versus 5.5 per cent in the prior estimate.
The administration forecasted 1.1 per cent growth for the fiscal year beginning April 2023.
It released its projections just days after the Bank of Japan reduced its growth forecast for this fiscal year to March 2023 to 2.4 per cent from 2.9 per cent three months ago, underlining the central bank's determination to maintain massive stimulus even as several other economies began to raise interest rates to combat inflation.
The government expects overseas demand to deduct 0.3 percentage point from real GDP in the current fiscal year, compared to a projected 0.2 percentage point increase earlier.
Overall consumer inflation, which includes volatile fresh food and energy costs, is forecast to be 2.6 per cent this fiscal year, up from 0.9 percent in the last assessment in January.
Wholesale inflation is expected to be 9.8 per cent this fiscal year, up from 2.0 per cent in January, as rising oil and food prices and a weaker yen drive up raw material costs.
Higher consumer inflation was not projected to have a significant impact on private consumption, as increased expenditure on services such as travel was likely to enhance economic growth this fiscal year, according to a Cabinet Office official.
The Cabinet Office forecasts nominal economic growth of 2.1 per cent in fiscal 2022 and 2.2 per cent in fiscal 2023. Higher nominal growth predictions indicate that the government expects more tax income.

Christopher J. Mitchell

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