Japan on Tuesday cut its fiscal year growth forecast for the world’s No. 3 economy, blaming weak exports and rising imports, as well as the impact of April’s sales tax hike on consumer spending and business confidence.
Japan’s Cabinet Office said it now expects expansion of 1.2 percent in the year to March, compared with a previous estimate of 1.4 percent.
The announcement comes a week after the Bank of Japan also lowered its outlook to 1.0 percent from an earlier 1.1 percent.
Japan has seen widening trade imbalances since the Fukushima nuclear crisis in March 2011 forced it to switch off its atomic reactors and turn to pricey fossil-fuel imports to plug the energy gap.
“The latest forecast was based on weak demand overseas and stronger-than-expected imports,” a Cabinet Office official said of the downward revision.
The cut was also “due to weak domestic demand following the consumption tax increase in April,” the official said.
However, the government said growth would bounce back to 1.4 percent in the following fiscal year.
Separately, Japan and Mongolia were expected to sign a free-trade deal when their leaders met in Tokyo yesterday, reports said, as Japan looks to tap the country’s fast-growing economy and huge natural resources.
Tokyo is also hoping the deal will deepen bilateral ties as it tries to resolve cases of Japanese citizens abducted during the Cold War by North Korean agents, according to reports in the Asahi Shimbun and Yomiuri Shimbun reported.
Mongolia is one of the few countries that has formal diplomatic relations with Pyongyang.
Japanese Prime Minister Shinzo Abe and Mongolian President Tsakhiagiin Elbegdorj were due to hold talks on Tuesday evening, with the trade agreement likely to be announced during the summit, the reports said.
Terms of the planned deal include Mongolia scrapping 5 percent of tariffs on Japanese car imports, while Japan would trim its levies on Mongolian beef, the Asahi said.
The agreement is likely to include a so-called investor-state dispute settlement (ISDS) clause, which allows firms to pursue compensation claims if they think government policy has damaged their investment, it added.
Japan-Mongolia trade stood at ￥31.20 billion (US$307 million) last year.