* 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 the fiscal year starting in April, the government
said on Monday, as Prime Minister Shinzo Abe's ambitious fiscal
and monetary policies boost domestic demand and a rebounding
overseas economy helps exports.
The Cabinet Office's economic forecast, issued annually and
revised every summer, will serve as a basis for the compilation
of the government's budget, a draft of which is likely to be
approved by the cabinet this week.
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.
The new forecast is also stronger than the previous
projection of 1.7 percent growth made last summer.
"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."
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 lower 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, 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.