Japan forecasts no growth in 2009

The Japanese economy will shrink this fiscal year and will manage only flat growth the following year, the government warned today.

The Cabinet Office lowered its forecast for the nation’s gross domestic product - the value of goods and services – for the fiscal year through to March 2009 to a 0.8% contraction, underlining looming fears about a global recession.

In July, it had expected 1.3% growth. It expects growth to stay flat during the fiscal year ending March 2010.

The gloomy outlook shows that Japan’s export-dependent economy, already driven into recession by fall-out from the US financial crisis and ensuing global slump, is in for more pain.

Major corporations like Toyota and Sony are slashing their earnings estimates and cutting work forces.

Nagayuki Yamagishi, strategist at Mitsubishi UFJ Securities in Tokyo, said the government’s projection was too optimistic.

“Economies around the world are contracting and so Japan’s economy is clearly going to contract,”

he said.

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%.

Last week, Japan announced a 23 trillion yen (€184bn) spending package to jump start growth, including measures to encourage employment and increase cash payments to people.