Japan's central bank downgrades GDP forecasts for FY 2010, 2011

16:40, October 28, 2010      

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The Bank of Japan (BOJ) on Thursday revised downwards its fiscal 2010 real GDP forecast to 2.1 percent from its July projection of 2.6 percent and 1.8 from 1.9 percent forecast for fiscal 2011.

In the central bank's semi-annual outlook report, GDP projections for fiscal 2012 were forecast to rebound 2.1 percent, although economists commented this far exceeds the nation's likely growth rate, which was estimated by the bank to be around 0.5 percent.

With regard to the current state of Japan's economy, the BOJ reported that the economy still shows signs of a "moderate recovery but the pace is slowing down as growth in exports and production has recently been decelerating."

"In the second half of fiscal 2010, the pace of recovery is likely to slow due to factors such as the slowdown in overseas economies and the ending of the boost from policy measures targeted at durable consumer goods, as well as the recent appreciation of the yen," the central bank said.

In terms of Japan's financial conditions, the bank said conditions have continued to show signs of easing.

"In the money market, while the Bank is pursuing powerful monetary easing through, for example, the virtually zero interest rate policy, the overnight call rate has remained at extremely low levels, interest rates on term instruments have declined, and the yield curve has flattened further," said the report.

As for prices, the bank said the nation's core consumer price index, which excludes fresh food prices, could fall 0.4 percent in fiscal 2010 and rise 0.1 percent the following year, unchanged from earlier forecasts.

The domestic corporate goods price index (CGPI) is expected to continue rising moderately on a year-on-year basis, however, due mainly to the improvement in the aggregate supply and demand balance, the bank said.

In addition the bank noted that developments in commodity prices could have a positive bearing on the economy in spite of the influence of the yen's strength.

The central bank said that corporate and consumer sentiment needs to be closely monitored for swings related to uncertainty over global growth and financial markets.



Source: Xinhua

(Editor:石希)

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