TOKYO (Reuters) - Japan's output gap narrowed to minus 0.3 percent in the first quarter of this year, the Cabinet Office said on Friday, adding further evidence that growth could soon exceed its potential and cause consumer price inflation to accelerate further.
Since 2008, actual gross domestic product has been below its potential, but this difference has been narrowing as improving domestic demand has driven growth.
The output gap has also narrowed as the Bank of Japan's aggressive quantitative easing, which it launched last year to meet a 2 percent inflation target, has bolstered the economy.
The output gap in January-March compares with minus 1.6 percent in October-December.
BOJ estimates had shown the output gap narrowed to around zero in January-March. That differs from the Cabinet Office figure, but the output gap has been historically difficult to pin down as it varies widely depending on what assumptions and measurements are used to calculate it.
The BOJ has about a year to achieve a self-imposed target of guiding inflation to 2 percent, and it has grown increasingly confident that this goal is likely to be met. That is causing some economists to scale back expectations for additional easing.
Since 2008, the global financial crisis triggered by the Lehman Brothers collapse has saddled Japanese companies with substantial surplus capacity.
Now that consumer spending is starting to pick up, there are signs that companies feel they do not have enough manufacturing capacity to meet demand.
(Writing by Stanley White; Editing by Edmund Klamann)