|Although an export slowdown has moderated the expansion, improving labour market conditions and stronger business confidence will partially offset the impact of the fiscal tightening scheduled in 2014 and 2015, notably due to the consumption tax hikes. An upturn in exports, as world trade picks up, will also support the expansion, with annual growth projected at around 1¼ per cent, helping to push inflation up.
With gross public debt surpassing 230% of GDP, a detailed and credible fiscal consolidation plan to achieve the target of a primary budget surplus by FY 2020 remains a top priority to sustain confidence in Japan’s public finances. The consumption tax rate should be hiked further to 10% by 2015, as planned. Increasing Japan's growth potential through bold structural reforms is also essential to address the fiscal situation, as is expansionary monetary policy. The Bank of Japan's “quantitative and qualitative monetary easing” should continue until the inflation target of 2% has been sustainably achieved.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.