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TOKYO (MNI) – The median forecast by economists for real GDP in
fiscal 2011 starting in April has been revised up to +1.6% on year from
their previous projection a 1.4% rise, thanks to a widely expected
rebound in net exports, a Market News International survey showed.

The revision followed Monday’s release of October-December GDP. The
Q4 GDP fell 0.3% on quarter (annualized -1.1%), posting the first drop
in five quarters on falls in both consumption and net exports.

But many researchers believe it was a temporary dip and that the Q1
GDP will show growth, backed by a rebound in net exports.

Itochu Corp said in a report, “Japan’s economy will move out of a
pausing phase in January-March, supported by rises in exports.”

Mitsubishi Research Institute, which forecasts fiscal 2011 GDP will
rise 1.2% on year, sees net exports will push up growth by 0.5%
percentage point.

Signs of a recovery in exports have already emerged. Exports after
adjusted for inflation showed a robust 7.3% gain from the previous month
in December, posting the first gain in five months, according to the
Bank of Japan.

Meanwhile, for fiscal 2012, forecasts expect GDP to grow at a
faster pace of +1.9% as rises in net exports will have a positive impact
on domestic demand, such as personal consumption and capital investment.

But the median forecast for fiscal 2012 has been revised down from
economists’ previous call of +2.2%.

Itochu Corp sees falls in both exports and capital investment will
be negative factors for the fiscal 2012 GDP, saying Japanese firms are
shifting their production overseas, following the yen’s appreciation and
the long-lasting sluggishness of domestic demand.

Dai-Ichi Life Research Institute has also revised down its fiscal
2012 outlook, saying, “Increases in prices of natural resources and food
are expected to continue, which will put downward pressure on the
Japanese economy.”

Imported crude oil prices averaged $91.5 a barrel in the first 20
days of January, posting the highest level since $102.7 marked in
October 2008.

Meanwhile, economists expect Japan will remain in mild deflation
through fiscal 2012 by the broadest measure. Their median forecast for
the GDP deflator is -0.2% on year, staying in negative territory for 15
years in a row.

Mizuho Research Institute said, “Improvement in the output gap has
been very slow.” It added that increases in prices of imported goods
will raise the import deflator, but that will be a factor pushing down
the GDP deflator.

Japan’s negative output gap — excess capacity vs. slack demand —
has been gradually improving from -9.3% marked in Q1 2009 following the
collapse of Lehman Brothers. But the gap remained in negative territory
in the third quarter of 2010, at -3.1%.

The median forecast for fiscal 2010 GDP has been revised down to
3.0% from 3.3%.

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

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