Japan Says Economy Won’t Grow in 2009 as Recession Deepens

By Toru Fujioka and Jason Clenfield

Dec. 19 (Bloomberg) -- Japan’s government slashed its economic growth forecast for next fiscal year as the global slowdown prompts companies to cut business investment.

Gross domestic product in the world’s second-biggest economy will probably be unchanged in the year starting April 1, lower than the government’s July forecast for a 1.6 percent expansion, the Cabinet Office said in Tokyo today. The forecasts are used to project tax revenue in the fiscal 2009 budget, due for release later today.

Meager growth means the government may have to sell more bonds to make up for declining tax revenue. The nation’s debt is the largest in the industrialized world, exceeding 170 percent of gross domestic product.

For the year ending March 31, the economy will contract 0.8 percent, matching the weakest reading since the nation’s last recession in 2001, the report said. Capital spending will drop 4.7 percent this year, which would be the biggest drop in a decade, the report showed. It will decline 4.2 percent in 2009, the government predicted.

Japan’s tax revenue will probably fall by 7.4 trillion yen ($84.4 billion) next fiscal year, a Finance Ministry official said yesterday. Receipts will total 46.2 trillion yen in the year ending March 31, 2010, 14 percent lower than this year’s projected revenue of 53.6 trillion yen, the person said under the condition of anonymity.

The government will probably need to sell about 35 trillion yen of new bonds next fiscal year to help pay for a shortfall in receipts, according to Naomi Hasegawa, a senior bond strategist at Mitsubishi UFJ Securities Co. in Tokyo.

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.netJason Clenfield in Tokyo at jclenfield@bloomberg.net