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The Japanese Government on Tuesday downgraded the nation’s economic growth forecast for the current financial year to 1.2 per cent from 1.4 per cent amid concerns about the impact of a tax increase.
The government predicted consumer spending, which accounts for about 60 per cent of gross domestic product, to grow 0.3 per cent in the financial year through March, revised down from a 0.4-per cent rise estimated in December.
Tokyo raised the nation’s sales tax in April to 8 per cent from 5 per cent — the first hike in 17 years. Policymakers were concerned that the impact of the hike would continue to dampen consumer demand.
The average monthly consumption spending per household fell 3.1 per cent in May for the second consecutive month.
The income of Japanese workers’ households also dropped 4.6 per cent in May for the eighth consecutive month despite reported pay raises at big companies.
Meanwhile, the government maintained its forecast on the consumer price index for the current financial year at 1.2 per cent, excluding the impact of the tax hike.
In April 2013, the Bank of Japan decided to take aggressive monetary easing steps to achieve an inflation target of 2 per cent within about 2 years as the banks as well as the government vowed to combat years of deflation.
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