Japan's economic growth is expected to reach 0.9 per cent in the year to March but will slow to 0.6 per cent the following year as exports lose steam, the government said today.
The government was previously predicting no growth in the current year - following a 1.4 per cent contraction the previous year - but better than expected export growth and domestic demand in the first half to September prompted the upwards revision.
Prime Minister Junichiro Koizumi vowed to press ahead with economic reforms in the face of the expected slowdown.
The unemployment rate is also expected to hit a record high of 5.6 per cent in the coming fiscal year, the Cabinet Office said in its annual economic outlook.
The gross domestic product (GDP) growth estimate for this year was revised upwards after exports to the United States surged during the first half to September and private consumption remained strong, a Cabinet Office official said.
Corporate giants such as Sony and NEC saw profits recover in the first half, buoyed by overseas demand as well as restructuring efforts but they have said they are unsure about prospects due to global uncertainties.
Deflation, which has restricted growth in Japan over the past decade, is expected to continue, hurting company profitability as consumers continue to hold back spending.
The government plans to stimulate the economy with an extra budget this year that includes three trillion yen ($25 billion) for public works projects and safety net measures.
AFP