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Japan forecasts 2.2% growth next year

Tokyo  - Japan’s economy will expand 2.2% in the fiscal year starting in April, the government said on Thursday, as housing investment picks up following a
devastating earthquake and as subsides spur consumption and capital expenditure.

The Cabinet Office issues economic forecasts in December for the following fiscal year, and its figures provide the basis for the government to compile its annual budget.

The government is expected to decide on its draft budget for fiscal 2012/13 in the coming days.

The government’s forecast for real gross domestic product is stronger than the median estimate for 1.8 percent growth, according to a Reuters survey. It expects market turbulence from Europe’s sovereign debt crisis to subside next year and for exports to recover as overseas economies pick up, and this may be more optimistic than some private sector economists, a Cabinet Office official told reporters.

The government is also more optimistic than some economists on Japan’s domestic demand, the official said. The GDP forecast for next fiscal year is lower than the previous forecast for 2.7 to 2.9% growth, but the government could still face criticism that it issued overly optimistic figures to help push through a plan to double the 5% sales tax.

For the current fiscal year ending in March, the government lowered its real GDP forecast to a 0.1% contraction from the 0.5% growth predicted previously to reflect the impact of a record earthquake and tsunami on March 11 that triggered the worst nuclear crisis in 25 years.

The government also cut this fiscal year’s forecasts as a strong yen and Europe’s sovereign debt crisis hurt exports.
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