Japanese Govt Upgraded its Fiscal Projection for 2023 on the Back of Higher Wages and Capital Expenditure

photo credit: AMRO Asia

Japanese government revised its projected growth forecast for the next fiscal year on prospects for higher business expenditure and substantial wage hikes that are seen underpinning consumption.

The upgraded projections underscore how Japan is set to buck a global growth slowdown thanks to robust domestic demand supported by inbound tourism reopening.

The projection provides a basis for the government’s annual budget plan due on Friday,

“Private sector demands will drive growth in fiscal 2023,” the government statement said.

“Although warning of downside risks from an overseas economic slowdown, inflation, supply bottlenecks and market fluctuations,” the statement added.

The real gross domestic product (GDP) of the world’s third largest economy is expected to expand 1.5% in the fiscal year beginning in April 2023.

The estimate showed that the size of nominal GDP will likely reach 560.2 trillion Yen (US$4.25 trillion) in fiscal 2022 and 571.9 trillion yen in fiscal 2023, to hit fresh records for two consecutive years, exceeding the pre-pandemic level seen in 2019.

Japanese real wages have been falling for seven months since April as consumer inflation has recently surged to 40-year-high levels, well above the Bank of Japan’s (BOJ) 2% target.

The government and the BOJ have repeatedly called for higher pay hikes as a key to Japan’s post-pandemic economic growth with sustainable price inflation.

However, its overall consumer price index (CPI) forecast for fiscal 2023 was left unchanged at an 1.7% increase from the July projection, pointing to the government subsidies to curb gasoline and utility bills and offset the rising living costs from higher import prices.

The Japanese government’s estimate underscores its hope that companies will increase wages next year to make up for the rising expenses due to higher commodity and import costs.

Meanwhile for the current fiscal 2022, the government cut its growth to an 1.7% expansion from a 2.0% increase projected in July, due to a bigger-than-expected decline in overseas demand.

While for inflation, it raised its consumer inflation forecast to a 3.0% increase from 2.6% seen in July.

Higher wage growth and a sustained solid economic recovery are crucial to how quickly the BOJ can unwind its massive monetary stimulus.

Previous articleMalaysian Campsite Operators In The Dark Over Licensing
Next articleLight A Christmas Tree And Not The Car

LEAVE A REPLY

Please enter your comment!
Please enter your name here