TOKYO, July 16 (Reuters) – The International Monetary
Fund (IMF) on Tuesday cut Japan’s economic growth forecast for
this year due, citing temporary auto output disruptions and weak
private investment in the first quarter.
But the fund offered an optimistic view on consumption due
to prospects that the bumper pay hikes offered by firms in this
year’s “shunto” spring wage negotiations will lift household
incomes.
“In Japan, the strong shunto wage settlement is expected to
support a turnaround in private consumption starting in the
second half,” the IMF said in an update to its World Economic
Outlook report.
The IMF said it now expects Japan’s economy to expand 0.7%
this year, down 0.2 percentage point from its forecast in April,
after an 1.9% increase in 2023. It maintained its projection for
the economy to grow 1.0% in 2025.
Recent weakness in consumption has been cited by some
analysts as a factor that could discourage the Bank of Japan
(BOJ) from raising interest rates too soon from the current
near-zero levels.
BOJ Governor Kazuo Ueda has voiced optimism over the outlook
for consumption, saying it will likely rebound once wage hikes
broaden and boost households’ purchasing power.
The BOJ will likely trim this year’s economic growth
forecast in July but project inflation will stay around its 2%
target in the next few years, sources have told Reuters, keeping
alive the chance of an interest rate hike this month.
Japan’s economy shrank an annualized 2.9% in January-March
due to output disruptions among some automakers and soft
consumption blamed in part on rising inflation. Many analysts
expect growth to have rebounded in the April-June quarter as
auto output disruptions run their course.
(Reporting by Leika Kihara; editing by Miral Fahmy)
