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Growth in Japan slower than first thought: officials

The Bank of Japan said economic growth has been slower than it anticipated, reinforcing the decision to keep interest rates unchanged yesterday.

"Developments in Japan's economy have so far deviated somewhat downward from the projection" in October, mainly because of a decline in housing investment, the central bank said in a report in Tokyo yesterday.

Growth in the year ending March 31 would be slightly lower than potential, the central bank said, stopping short of providing exact revisions. The bank sees potential growth, the pace of expansion achievable when almost all of Japan's labor and capital are used, of between 1.5 percent and 2 percent.

The bank predicted in October that the economy would expand 1.8 percent in the current fiscal year and 2.1 percent in the following period. Policymakers check the economy's performance against their semiannual forecasts every January and July.

Growth next fiscal year would be slightly higher than potential, the central bank said.

"With a virtuous cycle of growth in production, income, and spending remaining basically intact, in fiscal 2008 the rate of real GDP growth is likely to be broadly as projected," it said.

Policymakers kept the overnight lending rate at 0.5 percent in a unanimous decision earlier yesterday.

The bank cut its evaluation of the economy for the first time in three years last month, saying that the pace of growth "seems to be slowing."

Since then, Governor Toshihiko Fukui and one of his deputies, Toshiro Muto, have warned that the expansion would probably continue decelerating this year.
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