TOKYO (Reuters) - Japan's government on Thursday slightly raised its economic growth projections for this fiscal year from its previous estimates, as external demand is likely to more than offset weak domestic consumption, the Cabinet Office said.
In the twice-yearly economic outlook, the real economic growth rate for fiscal 2023/24 is estimated at 1.6%, up from 1.3% seen half a year ago as external demand contributed 1.4 percentage points to overall growth, due to a recovery in inbound tourism and automobile output.
Auto manufacturing had been hit earlier by chip shortages.
The economic growth rate is forecast to slow down slightly to 1.3% in the next fiscal year starting in April as the external demand contribution weakens sharply reflecting a rebound in domestic consumption.
The fiscal 2024 economic growth projection is slightly higher than the previous estimate of 1.2%.
Domestic demand is expected to rebound in the next fiscal year with the help of planned income tax cuts on top of the ongoing trend of wage hikes, a Cabinet Office official said.
The government projections were a little rosier than forecasts from private-sector economists, who expect the world's third largest economy to grow 1.5% this fiscal year and 0.9% next.
The growth projections provide the basis for government policy such as the annual budget for the coming fiscal year.
Overall consumer prices are forecast to rise 3.0% this fiscal year, taking energy subsidies that cut 0.6 percentage points off inflation into account. The growing ability of companies to pass on costs to customers backs the trend of price hikes, the official said.
Overall inflation is seen slowing down to 2.5% for the next fiscal year as effects of energy subsidies fade away, according to the government projections.
Nominal gross domestic product (GDP) is projected to rise 5.5% this fiscal year and 3.0% next, bringing the amount of nominal GDP to a record 615 trillion yen ($4.29 trillion) in fiscal 2024, it said.
($1 = 143.4700 yen)