Japan's economy will grow 1.4 percent in fiscal 2014 on the back of healthy domestic demand, amid inflation of 1.2 percent — excluding the effects of the consumption tax hike in April, the government projected Saturday.
The government's growth projection in real terms compares with estimated growth of 2.6 percent in fiscal 2013, indicating that the world's third-biggest economy will stay on the recovery path despite fears that the 3-point hike in the national sales tax to 8 percent on April 1 would stifle consumer spending and investment.
The government's price projection also signals a possible end to nearly two decades of deflation under the Bank of Japan's ultraeasy monetary policy.
In its latest forecast, the BOJ projected a 1.3 percent rise in the consumer price index for fiscal 2014. Under a massive monetary stimulus program introduced in April, the central bank is targeting an inflation rate of about 2 percent within about two years.
Economic and fiscal policy minister Akira Amari, who is in the hospital to receive treatment for early-stage tongue cancer, said in a statement that a possible economic slowdown triggered by the tax hike is a concern, but Japan's economy is "expected to continue to recover, buoyed by robust domestic demand" in the fiscal year beginning April 1.
With prices rising, the nation's nominal gross domestic product is set to expand by 3.3 percent, up from 2.5 percent during the current fiscal year to March 31, the government said.
The GDP deflator, a wider price gauge than the consumer price index, is forecast to rise 0.5 percent even if the impact of the consumption tax hike is excluded, it added.
