Japan to slash its 2016 economic growth forecast

The Japanese government is set to almost halve its economic growth forecast for 2016 after taking into account its changed sales tax policy and a global economic outlook darkened by the Brexit vote, according to people familiar with the matter.

Prime Minister Shinzo Abe’s administration plans to slash its 1.7% price-adjusted growth forecast for the year ending March 2017 to 0.9% in a new projection due for release Wednesday, the people said. The previous figure was released in January.

The revision is partly due to a decision announced in June by Abe to postpone a sales tax increase to 2019 from the previously scheduled April 2017, the people said. Officials had previously assumed that consumers would buy goods and services aggressively before items became more expensive with the higher tax rate.

Another reason for the large cut in the growth forecast is global market uncertainty stoked by the U.K.’s recent decision to leave the European Union and the impact it could have on Japan’s already lackluster exports and corporate spending, they said.

The Abe administration is likely to unveil its growth forecast for the following year at 1.2%, one of the people added.

Source: MarketWatch