Cablegate: Japanese Government Projects 1.4 Percent Real Gdp

VZCZCXRO1360
RR RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #0025 0060423
ZNR UUUUU ZZH
R 060423Z JAN 10
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 8546
INFO RUEHFK/AMCONSUL FUKUOKA 8181
RUEHNAG/AMCONSUL NAGOYA 5289
RUEHNH/AMCONSUL NAHA 0525
RUEHOK/AMCONSUL OSAKA KOBE 1994
RUEHKSO/AMCONSUL SAPPORO 8680
RUEATRS/TREASURY DEPT WASHDC
RHEHAAA/NSC WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS TOKYO 000025

SENSITIVE
SIPDIS

TREASURY FOR DOHNER, WINSHIP, AND FOSTER
STATE FOR E, EEB AND EAP/J
NSC FOR DANNY RUSSELL AND JIM LOI
STATE PASS TO USTR FOR AUSTR CUTLER, BEEMAN, LEE AND
HOLLOWAY

E.O. 12958: N/A
TAGS: ECON EFIN JA
SUBJECT: JAPANESE GOVERNMENT PROJECTS 1.4 PERCENT REAL GDP
GROWTH IN FY2010

1. (U) The Hatoyama Cabinet approved the GOJ's official
economic forecast for FY10 (April 2010 to March 2011) on
December 25. The official forecast, prepared by the Cabinet
Office and used in the Ministry of Finance's revenue
estimates for the FY10 initial budget, projects real GDP
growth of 1.4 percent. This would be the first positive
growth in three years, predicted on a recovery in both
domestic demand (1.1 percentage point (pp) contribution) and
external demand (0.4 pp contribution).

2. (SBU) The Hatoyama Administration appears to have treated
its official forecast in part as a policy target, i.e., it is
0.2 pp more optimistic than the Bank of Japan Policy Board
forecast and the private analyst consensus, both of which are
1.2 percent. The official forecast also projects 0.4 percent
nominal GDP growth in FY10.

3. (U) Looking at individual components, the government
projects real private consumption growth will accelerate in
FY10, rising 1.0 percent after a 0.6 percent increase in
FY09. Both real business investment and real housing
investment are estimated to rebound moderately, by 3.1
percent and 4.4 percent respectively. Real exports are
projected to increase 8.3 percent while real imports rise 5.2
percent. The combination of a relatively large increase in
exports and a relatively small rise in imports results in a
0.4 pp contribution from net exports to overall growth. On
the other hand, the government estimates public demand will
subtract 0.2 pp from overall growth, as the fading fiscal
stimulus and a broader policy shift away from public works
spending takes hold.

4. (U) The Cabinet Office projects a 0.8 percent decline in
the overall CPI in FY10, after an estimated 1.6 percent drop
in FY09. This is broadly consistent with the BOJ Policy
Board forecast and those of private analysts.

5. (U) In releasing the official forecast for FY10, the
Cabinet Office also revised its forecast for FY09. The
revised FY09 forecast shows real GDP growth contracting 2.6
percent, better than the 3.3 percent decline projected in
July. This is in line with the private analyst consensus.
Notably, personal consumption growth was revised to 0.6
percent growth from the 0.1 percent decline projected in July.

6. (U) GOJ Official Economic Forecast (percent)
--------------------------------------------- --

FY2009 FY2010
--------------
Nominal GDP -4.3 0.4
Real GDP -2.6 1.4
Domestic Demand (contribution) -2.2 1.1
Private Domestic Demand -3.2 1.3
Real Private Consumption 0.6 1.0
Real Private Housing Investment -16.9 4.4
Real Business Investment -16.5 3.1
Public Domestic Demand 1.0 -0.2
External Demand (contribution) -0.5 0.4
Real Exports -14.4 8.3
Real Imports -11.1 5.2
--------------------------------------------- -------
Unemployment Rate 5.4 5.3
Consumer Price Index -1.6 -0.8
Corporate Good Price Index -5.4 -0.9
Current Account Balance (JPY trillion) 14.0 15.8
(as a percent of nominal GDP) 3.0 3.3

ROOS

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