Tokyo: The Bank of Japan (BoJ) may cut its growth forecast for this fiscal year for a fourth time, as exports fail to bolster an economy weakened by April's sales-tax increase, according to people familiar with the central bank's discussions.
The expansion for the 12 months through March 2015 is likely to be lower than the one per cent median forecast of BoJ board members, said the people, who asked not to be named because the talks are private. Growth is likely to be 0.4 per cent, according to the median estimate in a survey of 24 economists by Bloomberg News on August 13-14.
Another downward revision when the board reviews its outlook in October would underscore waning momentum in the world's third-biggest economy. Governor Haruhiko Kuroda faces increased pressure to boost his unprecedented stimulus after Japan's deepest contraction in more than three years in the second quarter, according to economists at Citigroup and Morgan Stanley MUFG Securities.
"We think the BoJ will have no option but to revise down its projections again," said Takeshi Yamaguchi, an economist at Morgan Stanley MUFG Securities Co.
The weaker outlook contrasts with the government's decision last month to raise its assessment of the economy for the first time in six months. The downturn in demand that followed the sales-tax increase was easing, the Cabinet Office said in a report on July 17.
Gross domestic product (GDP) shrank an annualised 6.8 per cent in the second quarter as consumer spending and investment plunged after the three percentage point increase in the sales levy to 8 per cent. Industrial production dropped in June the most since the March 2011 earthquake as companies tried to pare elevated inventories.
The economy has received little support from exports, even after the yen has lost 16 per cent against the dollar since Prime Minister Shinzo Abe took power in December 2012 and began implementing his reflationary policies, dubbed Abenomics.
The volume of outbound shipments was down 2.5 per cent in June from levels in late September 2012, when the yen began to slide on expectations Abe would step up Japan's fight against two decades of stagnation.
The BOJ is set to review its economic and price outlook at an October31 meeting. The policy board in October last year forecast 1.5 per cent before cutting in a series of revisions to one per cent on July 15.