Bank of Japan Issues More Upbeat Forecast

The Bank of Japan issued an economic growth forecast that was far more optimistic than that of the government, raising speculation that bureaucrats may be keeping expectations low for their own political gain. Economists said the central bank’s estimate of 1.9% to 2.3% gross domestic product growth was more realistic than the Economic Planning Agency’s prediction of 1.5%. “From the prime minister’s point of view, they’d like to set the hurdle as low as possible so they can clear it and say they’ve been successful,” said Masaaki Kanno, chief economist for J.P. Morgan Securities in Tokyo. The BOJ report predicted the economy would continue to recover this year and next, led by rising corporate capital investment in information and communications-related sectors. Japan’s economy expanded by an anemic 0.6% in the fiscal year ended March 31, following two straight years of contraction. The BOJ said, however, that the “pace of recovery in personal consumption will be slow” because it will take time for the improvement in the corporate sector to filter through to the household sector. High unemployment also threatens to dampen consumer spending. The government reported that the jobless rate edged up to 4.7% in September from 4.6% in August. The jobless rate hit a postwar high of 4.9% in February.