Home > Publications > Forecast for the Japanese Economy >

Forecast for the Japanese Economy in Fiscal 2000 and 2001: September 2000

Summary

1. Growth Forecast Revised Upward to +1.9% for Fiscal 2000

In view of the faster-than-expected pace of recovery evident in recent data for the Japanese economy, including firm increases in personal consumption, we have revised our forecast for real GDP growth in fiscal 2000, ending March 31, 2001, from +0.9% to +1.9%. The driving force in the economy continues to be private capital investment. Corporate sentiment regarding the economy is continuing to improve, and, during the current fiscal year, the range of industries expanding their investments is expected to broaden, especially in IT-linked sectors. In addition, improvement in corporate performance is gradually beginning to bring recovery in employment incomes, and the upward trend in personal consumption is continuing. Government public works investment seems likely to contribute to boosting the economy in the first half of the current fiscal year but will clearly lose momentum in the latter half. The government is viewed as certain to formulate a supplementary budget before the end of calendar 2000, and we have therefore changed our outlook for "additional pump-priming expenditures of ¥3 trillion in fiscal 2001" to additional expenditures of this same magnitude that will begin to take effect from the end of fiscal 2000 into the beginning of fiscal 2001.

2. Continued Positive Growth of 1.6% in Fiscal 2001

We are forecasting real GDP growth of 1.6% in fiscal 2001, the third consecutive year of positive growth. However, we expect a cyclical decline in production due to inventory adjustments in the first half of the fiscal year, which will bring a slight decline in growth compared with the previous fiscal year. Moreover, we believe the current strong pace of recovery in corporate performance may begin to slow gradually, owing to deterioration in the terms of trade accompanying the increase in the price of crude oil and other factors. As a result, growth in private capital investment, which will have been the driving force up to that time, will likely weaken. On the other hand, since household incomes will continue to increase gradually, personal consumption is expected to remain firm and provide support for the economy. We also believe employment conditions will continue to improve but at a slow pace. Inventory adjustments will be virtually completed in the second half of fiscal 2001. We therefore expect stronger trends in production and a return to higher rates of growth in private capital investment.

Full Text