Bank of Japan cuts growth forecast

Bank of Japan cuts growth forecast


Tokyo: Japan’s central bank on 31 October 2007 cut its growth forecast for Asia’s largest economy to 1.8% for the current fiscal year, but predicted a pick-up in 2008 along with a return to inflation.

The Japanese economy remains on track to expand by 2.1% in the next fiscal year, the Bank of Japan said, while trimming its previous projection for 2.1% growth this year.

“Japan’s economy is likely to continue its sustained expansion with a virtuous circle of growth in production, income and spending in place," the BoJ said in a twice-yearly report.

It said the downgrade for this year was partly the result of a drop in construction activity due to tighter earthquake resistance standards.

Japan’s economy also shrank in the second quarter as corporate capital spending fell, while the unemployment rate jumped unexpectedly for a second straight month in September.

Consumer prices are expected to remain flat this year but rise by 0.4% next year, slightly less than previously predicted, according to the report, which is based on the forecasts of its nine-member policy board.

“Japan’s economy is likely to realize sustainable growth under price stability," it said.