Japan raises GDP outlook for fiscal 12 months 2021 after Reuters lifted its stimulus bundle

© Reuters. FILE PHOTO: Coronavirus disease (COVID-19) outbreak in Tokyo

By Kaori Kaneko

TOKYO (Reuters) – The Japanese government has raised its forecast for economic growth for the next fiscal year thanks to its latest stimulus package, which aims to accelerate the recovery from the damage caused by the coronavirus pandemic.

The economy is expected to grow by 4.0% in real terms in the next financial year from April 2021, according to the latest cabinet estimate on Friday.

The new estimate compared to their previous forecast of 3.4% growth that was forecast in July.

The upgrade was underpinned by the government’s third supplementary budget, approved earlier this week to fund the $ 708 billion stimulus package to help the economy recover from its COVID-induced slump in the second quarter.

The projected 4.0% growth for the next fiscal year would be the fastest annual expansion ever recorded if this were realized, as comparable data became available in 1995, the Cabinet Office said.

The government, which expects the economy to return to pre-COVID-19 levels by January through March 2022, backed by its broad political support, also warned of risks.

Policy makers need to “closely monitor the downside risks to the Japanese and overseas economies from the pandemic and the impact of movements in financial capital markets,” a cabinet official said.

The government will use the forecasts to finalize the national budget for the next fiscal year.

For the current fiscal year, which ends in March 2021, the government lowered its forecast for gross domestic product to a 5.2% decline, which would mark the biggest annual slump in history.

Previously, the economy forecast a 4.5% decline.

Consumer prices remain subdued due to weak domestic demand and the government’s discount travel campaign to support the tourism industry.

Total consumer prices are expected to fall 0.6% for this fiscal year, after previously anticipating a 0.3% decline.

In FY 2021, total prices will rise 0.4%, according to government figures, revised down slightly from the previous forecast of a 0.5% increase.

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