WRAPUP 1-Japan govt: economic growth to halve in 2011/12

* Govt sees Japan growth at 1.5 pct, CPI growth at zero
for 2011/12

* Annual export growth accelerates in Nov, 1st time in 9
mths

* Chinese monetary tightening, euro-debt crisis pose risks

* Govt cuts views on exports, business sentiment in December

* Record rise in retail investor sentiment on domestic
stocks

By Stanley White and Rie Ishiguro

TOKYO, Dec 22 (BestGrowthStock) – Japan’s economic growth will slow
in the fiscal year from April to only half the pace of the
current year due to weak exports and consumption, but consumer
prices will stop falling after three years of declines, the
government said.

Data on Wednesday also showed a pick-up in export growth in
November, but that failed to temper caution about overseas
demand because it was partly due to the yen’s pullback from
15-year highs.

The Democratic Party-led government also cut its view of
exports and business sentiment on Wednesday as Asia’s economic
recovery has shown signs of slowing.

Prime Minister Naoto Kan’s cabinet faces a test of fiscal
discipline as it compiles a 2011/12 budget proposal due on
Friday, and its rather sobering assessment of the next year’s
outlook could increase resistance to much-needed spending cuts.

“The government’s growth forecast is rather conservative
but
I would say it is rational and the government expects the
recovery to be sluggish,” said Yuichi Kodama, chief economist
at Meiji Yasuda Life Insurance.

“Compiling the budget is becoming more and more difficult
as
social welfare costs are increasing and there will be a toll on
other areas, because not many choices are available as reserves
are running out.”

SLOGGING THROUGH DEFLATION

The government forecast on Wednesday that gross domestic
product would grow a real 1.5 percent in fiscal 2011/12 after
climbing 3.1 percent in the current year to March 2011.

Overall consumer prices are projected to show flat growth
in the next financial year, which would mark the first time in
three years that the overall consumer price index (CPI)
managed to escape negative territory.

Japan has been slogging through deflation for much of the
past decade and the government is targeting positive CPI growth
by March 2012, as part of its drive to keep the fragile economy
on a sustainable recovery track.

But declaring an end to deflation may still be far off, a
Cabinet Office official said, underscoring the tentative nature
of any improvement in the CPI.

Exports rose 9.1 percent in November from a year earlier,
in
the first acceleration of export growth in nine months due to
shipments of steel to China, but that was less than the median
estimate for a 10.0 percent annual increase. [ID:nTOE6BL00G]

“Exports expanded but weren’t particularly robust,” said
Takuji Okubo, chief economist at Societe Generale Securities.

“The trend for exports is upward, but not robust enough for
Japanese companies to start investing more aggressively.”

In one positive sign, Japanese retail investor sentiment
towards domestic stocks showed a record improvement in December
to reach its best level in eight months, boosted by a jump in
Tokyo shares and a weaker yen, a Reuters survey showed.
[ID:nTIYMNE629]

The government is set to present a draft budget on Friday
for the next fiscal year starting in April. Should the overall
economy deteriorate more than the government is expecting,
policymakers may have little leeway for pump-priming given a
large fiscal debt burden.

The government may meet its spending and debt issuance
targets for next fiscal year, but higher taxes and spending
cuts
are needed to tackle rising welfare costs.

The government wants to implement comprehensive tax reform
— a coded expression for a sales tax hike — in fiscal
2012/13,
Finance Minister Yoshihiko Noda told reporters, but it is
difficult to gauge whether the Democrats could reach a
consensus
on the sales tax in a split parliament.

Economists expect the economy to have contracted in the
current quarter as the expiry of stimulus measures targeting
low-emission vehicles has dented domestic demand and Japan’s
key
trading partners, especially the United States and China, are
slowing down. Prime Minister Naoto Kan also said he expected
the
economy to contract in the fourth quarter.
(Additional reporting by Kaori Kaneko; Editing by Edmund
Klamann & Kazunori Takada)

WRAPUP 1-Japan govt: economic growth to halve in 2011/12