BOJ close to cutting FY 2008 growth estimate to 0.3% from 1.2%

TOKYO, Oct. 28 Kyodo - The Bank of Japan is close to deciding on a cut in its estimate for the country's economic growth in fiscal 2008 to an annualized rate of 0.3 percent in real terms, sharply lower from an earlier estimate of 1.2 percent growth, amid negative fallout from the global financial turmoil, sources close to the
matter said Tuesday.

The downward revision, which projects the lowest level of expansion in gross
domestic product since fiscal 2001, is attributed mainly to slower exports and
weak corporate capital spending, the sources said.
The central bank will include the latest growth projection for the year through
March in its biannual ''Outlook for Economic Activity and Prices'' report to be
released on Friday, when its Policy Board is widely expected to decide to
maintain the bank's key interest at 0.5 percent.
The BOJ is also expected to downgrade the forecast for fiscal 2009 starting
April to around 1.0 percent from 1.5 percent estimated in July.
As slower growth in advanced economies has had a negative effect on China and
other emerging economies, the BOJ believes Japan's economy will remain sluggish
for the time being with its exports taking time to recover, the sources said.
As for its projection for fiscal 2010, which the BOJ will release for the first
time on Friday, the bank is likely to forecast growth of 1.5 percent as the
Japanese economy is expected to return to a path of moderate expansion along
with a global economic recovery, they added.
Even with clearer signs of slowing growth, the BOJ is cautious about the upside
risks to inflation stemming from earlier hikes in crude oil and other commodity
prices, and remains positioned to dispel speculation regarding the direction of
its future interest rate policy.
''It is possible that natural resource prices will rise again once emerging
economies recover and demand grows,'' a senior BOJ official said.
In the outlook report, the central bank is also likely to lower its earlier
projections for Japan's consumer price inflation from 1.8 percent for the
current business year and 1.1 percent for fiscal 2009, the sources said.