Japan is likely to project that economic growth will slow to around 2.0 per cent in the next fiscal year, Japanese media reported on Saturday. An official outlook, to be approved by the government on Dec. 19, will also forecast an end to deflation, with Japan?s gross domestic product (GDP) deflator expected to turn positive toward the middle of the 2006 fiscal year, which runs to March 2007, the Yomiuri Shimbun said.

The newspaper said the government, which has forecast growth of 1.6 per cent for the current fiscal year to March 2006, was considering a growth forecast of 2.0 to 2.2 per cent for the 2006 fiscal year. Kyodo news agency quoted government sources as saying real GDP growth was likely to be forecast at around 2.0 percent for the world?s second-largest economy.

These figures top the median forecast in a Reuters poll of 19 economists last month for growth in the 2006 fiscal year of 1.8 per cent. But they lag 2.6 per cent growth analysts polled by Reuters expect this fiscal year. Yomiuri Shimbun said the government was looking at a matching nominal growth forecast of 2.0 to 2.2 percent next year while Kyodo?s sources said nominal growth would be projected between 2.0 and 2.5 percent. Nominal growth is not price adjusted. The Bank of Japan has pledged to stick to its ?quantitative easing? framework of flooding the banking system with excess funds until core annual CPI rises stably.