|Output growth slowed to around ½ per cent in 2014, reflecting in part the impact of the consumption tax hike. Output growth is projected to rebound to around ¾ per cent in 2015 and 1% in 2016, supported by improving labour market conditions and expanded monetary easing. The weaker yen is expected to help sustain export growth and push inflation closer to the 2% target.
Gross public debt is 230% of GDP (and net debt is 143%). In the wake of sharp output declines in the second and third quarters of 2014, the government announced the increase in the consumption tax rate that had been scheduled for 2015 will be postponed to 2017. This will make it challenging to achieve the target of a primary surplus by FY 2020, and therefore a detailed and credible fiscal consolidation plan has become even more vital. The Bank of Japan's “quantitative and qualitative monetary easing” should continue until the inflation target has been sustainably achieved. Bold structural reforms to boost competitiveness and potential growth are a priority, as stronger growth is needed to address the fiscal situation.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.