Japan projects no growth in 2009

The Japanese government has revised its GDP estimate downwards for the fiscal year ending March 2009, the Japanes cabinet office said today.

The Japanese government expects the economy to shrink this year and projects a zero growth in the year ending March 2010, in the wake of the global financial crisis and the threatening fears of a global recession.

This is for the first time in seven years that a no growth projection in the gross domestic product is made by the government.

The government now forecasts the nation's economy to shrink 0.8 per cent, down from its earlier estimate of 1.3 per cent growth forecast in July.

The government expects the jobless rate to worsen to 4.7 per cent in the fiscal year ending March 2010, from 4.2 per cent projected for the fiscal year ending March 2009. It had previously expected the unemployment rate to stand at 3.8 per cent for the current fiscal year.

The restructured forecast also shows the consumer prices falling 0.4 per cent in the next fiscal year and the corporate goods price index slackening 2.1 per cent on account the sharp decline in the crude oil price, a sharp rise in unemployment and a return to deflation next year.

The fears of a global recession and the US move to near-zero interest rates this week resulted in yen surging to a 13-year high yesterday, forcing Japan's central bank to cut its key interest rate to just 0.1 per cent, down from 0.3 per cent. (See : Japan hints at rate cut after yen surges)

This rate cut was the lowest rate in Japan central bank's history and the lowest in the developed world since July 2006 after Japan emerged from almost five years of zero interest rate policy.

The Bank of Japan also announced that it would increase its purchase of Japanese government bonds to 1.4 trillion yen ($15.7 billion) a month, up from ¥1.2 trillion.

The current business confidence in Japan is at its lowest in 34 years, according to a survey conducted earlier this week.

The Cabinet Office report published was the worst since the Japan's economy began rising from its last recession and from the early 2002 recession. In 2001, a zero growth was projected for the year ending March 2003, but the economy grew 1.1 per cent that fiscal year, according to the government.

Last week the government increased its economic stimulus plan by ¥23 trillion ($255 billion /  Rs1,196,000 crore).

For the first time since 1949, carmaker Toyota Corp this morning confirmed that it would report an annual operating loss in 2008-09. In a revamping process most major car manufacturers have cut production as well as employees.

Japanese exporters have been suffering amidst the yen's surge to a 13-year high and the global financial meltdown.

Earlier this month, the government said Japan fell deeper into recession in the third quarter than first thought, shrinking at an annual pace of 1.8 per cent.

The government now fears the economic downturn post-war period could be the longest and possibly deepest the country has faced in recent times.