TOKYO -- The Japanese government expects the economy to grow by 1.8% in price-adjusted real terms in fiscal 2018, which begins in April, thanks to strong private-sector demand.
The growth forecast has been revised up from the 1.4% predicted by the Cabinet Office in July. In nominal terms, the government expects 2.5% growth, unchanged from its July forecast.
The Cabinet Office also said in its economic forecast, adopted at a cabinet meeting on Tuesday, that personal consumption will likely increase by 1.4% in fiscal 2018. The office expects that a recently adopted policy package, aimed at helping companies increase wages and capital investment, will further improve employment conditions and incomes.
Capital investment is forecast to grow by 3.9%. The policy package as well as the recovery in overseas economies will likely help increase production in Japan, the forecast said.
The expected economic growth will be led largely by domestic demand, which is forecast to push up gross domestic product by 1.6%. The private-sector as a whole is expected to help expand the economy by 1.5% thanks to increased personal consumption and capital investment. Public-sector demand will likely push up GDP by 0.1% given public-works projects included in the supplementary budget for the current fiscal year, among other policy measures.
External demand, the difference between exports and imports, will likely expand the economy by 0.1%, the Cabinet Office said. Exports are expected to grow by 4.0%, while imports are also forecast to grow strongly, by 3.4%, thanks to increased domestic demand. As a result, economic expansion is expected to be led primarily by private-sector demand, the Cabinet Office predicts.
The government expects the consumer price index to rise by 1.1% in fiscal 2018, and said that economic recovery will likely tighten supply-demand balance. It also expects "progress" for Japan toward putting an end to deflation. The GDP deflator, a measure of overall price changes, is predicted to increase by 0.8% in the next fiscal year.
The Cabinet Office also revised up its GDP growth forecast for the current fiscal year, from 1.5% to 1.9% in real terms. Nominal GDP growth is now expected to be 2.0% instead of the 2.5% forecast in July.