* Fiscal 2013 nominal GDP growth at 2.7 pct, exceeding real
* Govt warns of risks from European debt, forex moves
* Expects bold easing steps by BOJ to achieve 2 pct
TOKYO, Jan 28 Japan's economy will likely grow
2.5 percent in 2013/14 fiscal year starting in April, the
government said on Monday, based on expectations that Prime
Minister Shinzo Abe's ambitious fiscal and monetary policies
will boost domestic demand and a rebounding overseas economy
will help exports.
The Cabinet Office's economic forecast, issued annually and
revised every summer, will serve as a basis for deciding the
budget, a draft of which is likely to be approved by the cabinet
"Overseas risk factors have been easing. Of course, downside
risks are not completely gone," Economics Minister Akira Amari
told a press conference after a cabinet meeting in Tokyo.
"Japan is compiling its growth strategy following the
emergency stimulus steps... I think Japan will be able to
achieve the growth forecast if the strategy is implemented
The government's projection for real gross domestic product
is roughly in line with the Bank of Japan's estimate issued last
week, but it is stronger than the median estimate for 1.8
percent growth in a Reuters poll.
"Exports are expected to grow as the global economy is
likely to recover moderately, which would help corporate
activity. The government measures will also help capital
spending," an official from the Cabinet Office said.
"Also, employment is likely to increase, helped by the
economic measures, which would boost private consumption."
The new forecast is also stronger than the previous projection
of 1.7 percent growth made last summer.
Abe led his Liberal Democratic Party to a landslide victory
in December and his campaign for aggressive budget and monetary
stimulus has pushed the yen to a 2 1/2 year low against the
dollar and sparked a stock market rally on hopes that a weaker
currency will boost exports.
Earlier this month, the government approved a 10.3 trillion
yen ($114.4 billion) economic stimulus plan, the biggest
spending boost since the global financial crisis.
The government also said Japan was expected to achieve
nominal gross domestic product growth of 2.7 percent in fiscal
2013, exceeding real GDP growth for the first time in 16 years.
There will be a rush of consumer spending before a planned
sales tax hike in April 2014, which will boost growth by 0.4
percentage point for the next fiscal year, it said.
For the current year to March, the government cut its growth
forecast for real GDP to 1.0 percent from 2.2 percent.
The consumer price index will rise 0.5 percent in the next
fiscal year, rising for the first time in five years, after an
anticipated 0.1 percent fall this fiscal year, according to the
estimate, indicating there is still a long way to go to achieve
the Bank of Japan's new inflation goal of 2 percent.
Under relentless pressure from Abe, the BOJ doubled its
inflation goal and pledged open-ended asset buying from 2014.
The GDP deflator, a broad measure of price trends, will
likely rise 0.2 percent in fiscal 2013 after declining 0.6
percent this fiscal year, the government estimated.
That would mark the first time since fiscal 1997 that the
GDP deflator has risen, the government said.
It also noted that Japan needs to pay heed to risks such as
Europe's sovereign debt, uncertainty in the overseas economy,
foreign exchange movements and power supply restraints.