The Japanese government revised down its official real GDP growth forecast for the fiscal year beginning in April 2019 to 1.3% from the 1.5% it announced in July.
The cabinet office expects the trimmed growth figure on the back of government plans to raise the sales tax in Japan to 10% in October 2019 from the current 8%, it said Dec. 18. A 1-percentage-point increase in sales tax drags Japan's real GDP down by 0.3%, the cabinet office noted.
Uncertainties relating to the trade dispute between the U.S. and China, and a potentially subsequent slowdown in the global economy also played a role in the downward revision to Japan's GDP growth forecast.
"The government will employ as many stimulus measures as possible to overcome potential hindrance by the tax raise," Japanese Economy Minister Toshimitsu Motegi said. The government is planning to exempt essentials, such as food, from the looming sales tax hike, as well as lower taxes on home and car purchases.