Japan Projects 2 Percent Growth in Fiscal 2008, but Minister Says That May Hinge on US Economy.
The Japanese government on Wednesday projected the economy would grow 2 percent next fiscal year even as the economy minister warned that target would be hard to reach if the U.S. economy slows and oil prices remain high.
Economy Minister Hiroko Ota also said a slowdown in domestic construction could drag on growth. "If these risks (persist), the next fiscal year's growth rate may be lower than the projection," Ota told a news conference.
The U.S. economy, struggling with a housing slump and credit crisis, is Japan's biggest export market, so a slowdown there could hurt Japanese companies. In the latest annual outlook released Wednesday, the government did cut its growth projection for the current fiscal year through March to 1.3 percent from a previous 2 percent.
The outlook, approved by Prime Minister Yasuo Fukuda's Cabinet, also sees Japan beating deflation -- or falling prices -- during the next fiscal year, which starts in April. The core consumer price index inched up 0.1 percent in October, the first year-on-year increase since last December.
The report also suggests that the government will pressure the Bank of Japan to keep interest rates low to sustain the country's modest growth. The central bank began a two-day meeting Wednesday amid expectations that it would leave its benchmark interest rate at 0.5 percent.
Ota said that while domestic demand is likely to lead the Japanese economy during the next fiscal year, consumption growth would be limited because "wage increases will likely continue to be moderate."
Tokyo Shares Hit by Forecast
Tokyo shares were lower for the sixth straight day on Wednesday, after the government downgraded its economic growth forecasts for the current year due to a sharp decline in housing investment. The benchmark Nikkei 225 average fell 1.2 per cent to 15,030.51 while the broader Topix index was 0.9 per cent lower at 1,456.79.
The government revised down its real gross domestic product growth forecast for the year ending March 2008 to 1.3 per cent from an earlier 2.1 per cent. The government blamed stricter building regulations that were adopted in June, which are expected to cause a 12.7 per cent fall in housing investment this year.
Shares of Japan's leading banks slid, with Mizuho declining 1.3 per cent to Y529,000 and Mitsubishi UFJ off 1.1 per cent at Y1,031. Shares of NTT DoCoMo (NYSE:DCM), Japan's leading mobile phone operator, rose 1.7 per cent to Y179,000 after the company confirmed that its president, Masao Nakamura, had met with Steve Jobs, Apple's president, in the US. The two companies are discussing DoCoMo becoming the national service provider for Apple's iPhone. But analysts are sceptical of the deal, saying the benefits to DoCoMo could be quite small.
Steel shares were mixed to higher, after Nippon Steel, the country's leading steel maker, said it would increase cross-shareholdings with Sumitomo Metal Industries and Kobe Steel. The move is part of a continued effort by Japanese steelmakers to fend off hostile bids in the wake of the Arcelor-Mittal deal and increase their purchasing power in the face of increased consolidation in the raw materials sector. Sumitomo shares edged down 0.4 per cent to Y449 and Kobe declined 0.6 per cent to Y340. Nippon however rose 0.2 per cent to Y617.
The Japanese government on Wednesday projected the economy would grow 2 percent next fiscal year even as the economy minister warned that target would be hard to reach if the U.S. economy slows and oil prices remain high.
Economy Minister Hiroko Ota also said a slowdown in domestic construction could drag on growth. "If these risks (persist), the next fiscal year's growth rate may be lower than the projection," Ota told a news conference.
The U.S. economy, struggling with a housing slump and credit crisis, is Japan's biggest export market, so a slowdown there could hurt Japanese companies. In the latest annual outlook released Wednesday, the government did cut its growth projection for the current fiscal year through March to 1.3 percent from a previous 2 percent.
The outlook, approved by Prime Minister Yasuo Fukuda's Cabinet, also sees Japan beating deflation -- or falling prices -- during the next fiscal year, which starts in April. The core consumer price index inched up 0.1 percent in October, the first year-on-year increase since last December.
The report also suggests that the government will pressure the Bank of Japan to keep interest rates low to sustain the country's modest growth. The central bank began a two-day meeting Wednesday amid expectations that it would leave its benchmark interest rate at 0.5 percent.
Ota said that while domestic demand is likely to lead the Japanese economy during the next fiscal year, consumption growth would be limited because "wage increases will likely continue to be moderate."
Tokyo Shares Hit by Forecast
Tokyo shares were lower for the sixth straight day on Wednesday, after the government downgraded its economic growth forecasts for the current year due to a sharp decline in housing investment. The benchmark Nikkei 225 average fell 1.2 per cent to 15,030.51 while the broader Topix index was 0.9 per cent lower at 1,456.79.
The government revised down its real gross domestic product growth forecast for the year ending March 2008 to 1.3 per cent from an earlier 2.1 per cent. The government blamed stricter building regulations that were adopted in June, which are expected to cause a 12.7 per cent fall in housing investment this year.
Shares of Japan's leading banks slid, with Mizuho declining 1.3 per cent to Y529,000 and Mitsubishi UFJ off 1.1 per cent at Y1,031. Shares of NTT DoCoMo (NYSE:DCM), Japan's leading mobile phone operator, rose 1.7 per cent to Y179,000 after the company confirmed that its president, Masao Nakamura, had met with Steve Jobs, Apple's president, in the US. The two companies are discussing DoCoMo becoming the national service provider for Apple's iPhone. But analysts are sceptical of the deal, saying the benefits to DoCoMo could be quite small.
Steel shares were mixed to higher, after Nippon Steel, the country's leading steel maker, said it would increase cross-shareholdings with Sumitomo Metal Industries and Kobe Steel. The move is part of a continued effort by Japanese steelmakers to fend off hostile bids in the wake of the Arcelor-Mittal deal and increase their purchasing power in the face of increased consolidation in the raw materials sector. Sumitomo shares edged down 0.4 per cent to Y449 and Kobe declined 0.6 per cent to Y340. Nippon however rose 0.2 per cent to Y617.
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