(Bloomberg) --
The International Monetary Fund sees Japan's economy growing faster than previously expected this year, citing a boost from the stimulus package unveiled last month by Prime Minister Shinzo Abe.
The IMF now forecasts Japan's economy will expand 0.7% in 2020, up from a 0.5% forecast in October.
The Washington, D.C.-based lender also raised its projection for last year by 0.1 percentage point to 1%, citing better-than-expected consumer spending, supported by shopping rebates and other government measures designed to offset the damage from October's sales tax hike. Robust business investment also helped, the fund said.
Although the IMF forecasts slower growth of 0.5% in 2021 once the fiscal stimulus-boost fades, the fund's more optimistic near-term projections are likely to relieve even more pressure from the Bank of Japan ahead of a rate decision Tuesday.
All 42 economists surveyed by Bloomberg forecast the bank will stand pat on policy this week and raise its growth forecasts for Japan in a quarterly outlook report due the same day.
Japan's Improved Growth Forecast Suggests BOJ Upgrade in January
In its last report, in October, the BOJ predicted Japan's economy would grow 0.6% in the year through March 2020. It also projected 0.7% growth for the next fiscal year, which is half the rate estimated by the government after releasing its stimulus plan.
To contact the reporter on this story: Yuko Takeo in Tokyo at ytakeo2@bloomberg.net
To contact the editors responsible for this story: Paul Jackson at pjackson53@bloomberg.net, Jason Clenfield
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