Japan cuts growth forecast to 0.9% as economy falters

Tokyo skyline Image copyright AFP

Japan's government has cut its growth forecast sharply amid speculation it may soon unveil a new stimulus package to support the ailing economy.

Gross domestic product is expected to grow by 0.9% this fiscal year, down from a January estimate of 1.7%.

The inflation forecast was also downgraded to a rise of 0.4%, versus an earlier projection for 1.2%.

Prime Minister Shinzo Abe is said to be preparing a new stimulus package that could be as large as 20tn yen ($192bn).

He could co-ordinate a move with the country's central bank, which is scheduled to hold its monetary policy meeting later this month.

In January, the Bank of Japan introduced negative interest rates in an attempt to stimulate the economy.

Mr Abe, whose economic policies have been dubbed Abenomics, announced last month that he would delay an increase to the country's sales tax to 10% from the current 8%.

Consumer spending in Japan accounts for about 60% of economic growth.

The three arrows: explaining Abenomics

Japanese Prime Minister Shinzo Abe's economic policy, which quickly became known as "Abenomics" is based on three arrows:

  • The monetary arrow: expansion of the money supply to combat deflation
  • The fiscal arrow: increased government spending to stimulate demand in the economy
  • The structural arrow: structural reforms to make the economy more productive and competitive

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