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On Tuesday, Japan’s government lifted its growth outlook for the current and subsequent fiscal years, projecting the economy to grow 1.9 percent and 1.8 percent, respectively, citing strong domestic demand, the Cabinet Office said.

The government had forecast in July a 1.5 percent and 1.4 percent growth for fiscal 2017, 2018, respectively.

The country’s economy has grown at a steady speed this year, supported by increasing export growth that has maintained the manufacturing sector humming. The main challenge for policymakers remains insistently low inflation that is thwarting the effort of the Bank of Japan to leave its immense stimulus.

Consumer inflation is projected at 0.7 percent for this fiscal year and 1.1 percent after, highlighting the challenge for the central bank to increase inflation to its 2 percent aim as prices continued to delay an economy growing at a steady movement.

The projections of the government were higher than those seen by the central bank and most private-sector economists, while the inflation estimations are more passive than the central bank’s rosy estimations.

The government also estimated private consumption expenditure to expand 1.2 percent in 2017 fiscal and 1.4 percent in 2018 fiscal.

Moreover, external demand is predicted to contribute 0.3 percent to growth in 2017 fiscal and 0.1 percent in 2018 fiscal.

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The government also forecast the jobless rate to dip to 2.8 percent in 2017 and 2.7 percent in 2018.

A nominal growth of 2.0 percent for the current fiscal year is projected by the Cabinet Office, and 2.5 percent for the 2018 fiscal year from April 1, they said. Higher nominal growth forecasts point to government anticipations for higher tax revenue.

The growth forecasts will be used to project tax revenue and assemble next year’s budget draft, expected to be validated by the cabinet on December 22.

The government generally releases economic outlooks for the coming fiscal year in December when compiling the yearly budget and reviews them around mid-year.

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