Japan's economy to shrink 4.7% in 2020/21: Central bank

Japan's economy will contract 4.7 per cent in the year to March 2021, the central bank said Wednesday, projecting a recovery the following year but warning deep uncertainty remains.

The fresh outlook, with policymakers giving a range of shrinkage from 5.7 to 4.5 per cent, is a downgrade from an April projection of a 5.0-3.0 per cent contraction.

The Bank of Japan stayed hopeful about a future recovery but said the outlook was shrouded by possible future waves of the virus, which made calculations difficult.

"Japan's economy is likely to improve gradually from the second half of this year with economic activity resuming, but the pace is expected to be only moderate while the impact of the novel coronavirus remains worldwide," the BoJ said in a statement.

The bank said it expected the global economy to steadily recover, projecting Japanese GDP would expand 3.3 per cent in the year to March 2022, before logging 1.5-per cent growth in the following fiscal year.

But it also stressed that "the outlook... is extremely unclear" with its assumptions involving "high uncertainties".

Officials also see Japan's core consumer prices falling 0.5 per cent for the year to March, well below the government's target of stable 2.0 per cent inflation to foster sustainable growth.

The central bank said it would maintain its massive monetary easing programme, leaving short-term rates at minus 0.1 per cent while keeping long-term rates around zero per cent.