By Shigeo Kodama

TOKYO (MNI) – The government is likely to cut its forecast for
Japan’s fiscal 2012 economic growth to the lower half of the 2% range
from the current projection of +2.7 to +2.9%, when it lays final
groundwork for drafting the fiscal 2012 budget later this week.

A senior government official, who declined to be named, told Market
News International that a downward revision from the government’s August
projection will be inevitable in the face of global slowdown caused by
the European debt crisis.

“It is difficult to maintain the current outlook,” he said. “It is
possible” that the official forecast for fiscal 2012 GDP will be revised
down to the lower half of the 2% range.

The Organization for Economic Cooperation and Development has
revised down its outlook for the 2012 world growth to +3.4% in November,
from +4.6% in May.

Private-sector economists here have also revised down their outlook
for Japan’s GDP growth for fiscal 2012 to +2.02% this month from +2.87%
in August, according to the latest monthly survey by the Cabinet
Office’s Economic Planning Association.

In its semi-annual Outlook Report issued in October, the Bank of
Japan board revised down its median forecast for fiscal 2012 GDP to
+2.2% from +2.9% projected three months earlier.

Meanwhile, Takao Komine, who was director of the Research Bureau of
the then Economic Planning Agency (now the Cabinet Office) from 1999
to 2001, also said the government is likely to revise down its official
forecast to a range between +2.0% and +2.4% for the next fiscal year.

Komine, who teaches economics at Hosei University in Tokyo, however
ruled out the possibility that the official forecast will fall below 2%.

He said the government wants to offer an optimistic economic
scenario, which would help set the stage for hiking the 5% sales tax
planned for coming few years.

The government is also widely expected to revise down its 2011 GDP
forecast from the current estimate of +0.5%.

Economists now forecast a contraction in the current fiscal year
after official data showed this month that annualized Q3 GDP growth was
revised down to +5.6% from a preliminary +6.0%.

“It is impossible to meet the goal,” Komine said, adding that the
government will probably revise down its outlook to around -0.4% for
fiscal 2011.

In order to meet the current +0.5% forecast, GDP must show a high
gain of around +1.4% q/q (annualized +5% to +6%) in each of the final
quarter of 2011 and the first quarter of 2012.

skodama@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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