TOKYO Aug 2 Japan's economic growth will slow
to 1.0 percent in fiscal 2014/15, less than half the pace
expected this year, as a planned sales tax hike weighs
temporarily on consumption, government forecasts showed.
In fiscal 2013/14, which began in April, Japan's economy is
forecast to expand 2.8 percent as an improving labour market
bolsters consumer spending and as policies to end 15 years of
deflation start to take hold, the cabinet office said.
That is an upgrade from the government's previous forecast
of 2.5 percent growth.
Prime Minister Shinzo Abe has to decide this later this year
whether to carry out a plan that would raise the 5 percent sales
tax to 8 percent from next April and then to 10 percent in
Private consumption is expected to grow 0.5 percent in
fiscal 2014/15, less than the 2.1 percent growth forecast for
the current fiscal year, the cabinet office said.
The plan to raise the sales tax will add 0.2 percentage
point to gross domestic product (GDP) in fiscal 2013/14 as
shoppers rush to buy goods before the first tax hike, according
to a cabinet office official.
But the tax increase would then subtract 0.6 percentage
point from economic growth in fiscal 2014/15 as consumers scale
back purchases, the official said.
Overall consumer prices are expected to rise 3.3 percent in
fiscal 2014/15, but excluding the tax hike prices will rise 1.2
percent, the cabinet office said.
In comparison, overall consumer prices are forecast to rise
0.5 percent in fiscal 2013/14, the cabinet office said.
The sales tax hike is meant to be the first step towards
fixing Japan's public debt, which at more than double annual
GDP, is the biggest burden in the industrial world.
Abe has made economic recovery and the defeat of deflation
his top priorities, but there are concerns he could delay the
pace of tax hikes to avoid a slowdown in growth.
The Bank of Japan unleashed an intense burst of monetary
stimulus on April 4, promising to double the supply of money
through aggressive asset purchases to meet its 2 percent
inflation target in roughly two years.