The Japanese government has lowered its GDP growth forecast for the current fiscal year from 0.9% to 0.7%, citing weak exports affecting economic recovery. Although the forecast is still higher than the private sector's 0.5%, the weakness in global demand and domestic consumption has increased economic pressure. The Bank of Japan maintains ultra-low interest rates, suggesting that the conditions for interest rate hikes are gradually maturing, but if demand continues to weaken, plans to exit the easing policy may slow down. The government has committed to formulating spending plans to address rising living costs
According to the Zhitong Finance APP, the Japanese government on Friday lowered its GDP growth forecast for the current fiscal year due to weak exports dragging down the fragile economic recovery.
In the revised forecast, the Cabinet Office of Japan adjusted the inflation-adjusted GDP growth forecast for the fiscal year ending in March 2025 from 0.9% in July to 0.7%.
This is the second reduction following a similar downgrade in July, but it remains above the private sector's growth forecast of 0.5%. The growth forecast for the next fiscal year remains at 1.2%.
It is understood that the Japanese government released its economic growth forecast in January this year and then made a downward revision around July. However, such adjustments at this time of year are rare, highlighting the increasing pressure on the economy from cooling global demand and weak domestic consumption.
The Bank of Japan maintained its ultra-low interest rates on Thursday and indicated that risks surrounding the U.S. economy have somewhat diminished, suggesting that the conditions for another rate hike are maturing.
However, if global and domestic demand continues to weaken, the Bank of Japan's plans for a full exit from a decade-long accommodative monetary environment may slow down.
These forecasts serve as the basis for preparing the national budget.
The Cabinet Office of Japan stated, "Due to high prices heavily impacting low-income earners, measures should be taken to help them maintain their livelihoods."
Private sector members of the government's top economic council also called for the government to implement effective and sufficient economic measures to help restore momentum in private consumption.
The government led by Prime Minister Shigeru Ishiba has committed to drafting a large-scale spending plan later this year to alleviate the impact of rising living costs on households and support the broader economy