IMF Raised Japan’s Growth Forecast to 1.6% in 2014

The International Monetary Fund on Thursday raised its economic growth estimate for Japan in 2014, saying the economy grew at a faster-than-expected pace earlier this year before the 3-percentage-point consumption tax hike to 8 percent from April 1.

But the IMF lowered its estimate of global economic growth in 2014 by 0.3 percentage point, to 3.4 percent, due to slowing growth in the United States and emerging nations including China.

In an update to its semiannual World Economic Outlook, the IMF said the Japanese economy will grow 1.6 percent this year in terms of inflation-adjusted gross domestic product, up by 0.3 percentage point from its April forecast.

However, the IMF said Japanese growth will slow to 1.1 percent in 2015, due in part to a further increase in the national consumption tax to 10 percent. That hike is scheduled to take effect in October 2015, aimed at restoring Japan’s fiscal health, the worst among major developed economies.

IMF chief economist Olivier Blanchard told a press conference that the upward revision to Japan’s forecast growth rate in 2014 “reflects the effects of Abenomics, and stronger domestic demand, including investment,” referring to Prime Minister Shinzo Abe’s policies centering on drastic monetary easing and massive fiscal spending.

But the IMF believes the pace of growth is destined to slow as a result of the tax increases.
“Our forecast for 2015 gives a glimpse of the difficulty,” the IMF added. “Growth is forecast to be only 1.1 percent, reflecting in part the adverse effects on demand of the planned increase in consumption taxes later in the year.”

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza