Nevertheless, domestic demand is likely to increase and exports are expected to continue increasing moderately on the back of the recovery in overseas economies. A virtuous cycle among production, income, and spending is likely to be maintained in the corporate and household sectors.
Firms’ and households’ growth expectations and potential economic growth are also likely to rise moderately in line with continued accommodative financial conditions. In fiscal 2017, the rate of economic growth is likely to decelerate significantly – mainly due to the effects of the planned consumption tax hike and cyclical deceleration in business fixed investment – but is still likely to remain positive (Chart 1).