With a virtuous cycle from income to spending in both the corporate and household sectors, Japan’s economy through fiscal 2016 is likely to continue growing at a pace above its potential, which is currently estimated to be around 0.5 percent or lower.
Thereafter, through fiscal 2017, the economy is projected to maintain its positive growth, although with a slowing in its pace to around a level somewhat below the potential growth rate. The slowdown is due mainly to (1) the effects of a front-loaded increase and subsequent decline in demand prior to and after the consumption tax hike planned in April 2017 and (2) cyclical deceleration.