[TOKYO] Japanese analysts are sharply cutting their economic growth forecasts for the year amid expectations that activity shrank in the second quarter, a survey showed, piling pressure on the central bank to trim its own rosy projections.
A poll of roughly 40 major think tanks, conducted each month by a semi-government body, showed on Tuesday analysts now expect the economy will grow 1.21 per cent in the year to March 2016.
That was a rare sharp downgrade from 1.66 per cent projected in the previous month's ESP survey, regarded as the most comprehensive poll available in Japan.
It also widened the gap between private-sector views and the BOJ's upbeat forecast last month for a 1.7 per cent expansion this year.
The world's third-largest economy likely contracted an annualised 1.9 per cent in April-June due to weak exports and household spending, a sharp reversal from a 3.9 per cent expansion in the first quarter, a Reuters poll showed. The data will be released on Monday.
Many analysts agree with the Bank of Japan that growth will rebound in the third quarter as solid US demand lifts exports and Japanese households resume spending as wages rise.
But the expected dismal second-quarter reading and any weak data over the summer will most certainly force the BOJ to cut its outlook when it next reviews its forecasts in October, analysts say.
"The question is how big the BOJ's downgrade will be. The BOJ says the current weakness in consumption is temporary but it's uncertain whether that's indeed the case," said Yuichiro Nagai, an economist at Barclays Capital Japan.
The downgrade in forecasts has not bolstered expectations of imminent monetary easing, partly as BOJ officials have clung to their upbeat rhetoric despite a recent slew of weak data.
"Unless the economy suffers another contraction in the third quarter and slides into recession, the BOJ will probably stick to its rosy scenario and hold off on easing further," said Barclay's Mr Nagai.