TOKYO (Reuters) - The government forecast on Saturday that Japan's real gross domestic product will grow by 1.4 percent for the fiscal year starting March 2014, slowing from an expected 2.6 percent growth for the current year as a planned sales tax increase is seen dampening consumption.
The forecast is part of the annual budget review. The government projects about 50 trillion yen ($480.33 billion) in tax revenue for the coming fiscal year based on the growth forecast.
While the higher sales tax is expected to curb consumption, the government expects positive economic growth thanks to the effects of a fiscal and monetary stimulus.
The national sales tax is set to rise to 8 percent in April and could rise to 10 percent in 2015 if the government of Prime Minister Shinzo Abe goes ahead with its fiscal consolidation plan.
The government also forecast that consumer prices will rise by about 1.2 percent in the 2014 fiscal year, without considering an impact from the sales tax hike. Consumer prices are expected to show a rise of 0.7 percent in the current fiscal year. The Bank of Japan launched a massive monetary stimulus program aimed at pushing the inflation rate up to 2.0 percent in two years, in a bid to wrench the country out of a long phase of deflation. ($1 = 104.0950 Japanese yen)
(Reporting by Yuko Yoshikawa, Writing by Yuka Obayashi; Editing by Simon Cameron-Moore)