Fresh recession woes threatens Japan's optimism

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MONDAY, 25 DECEMBER 2000 B U S I N E S S S T O R Y Fresh recession woes threatens Japan's optimism 23 DECEMBER 2000

TOKYO (Reuters): Japan's central bank governor said on Friday the deflation risks that have hamstrung economic recovery for years were back in the picture, while the top economic planner hinted that growth may have already contracted. Bank of Japan Governor Masaru Hayami also warned that a US slowdown would cast a shadow.

Growing evidence already exists that a renewed slowdown in Japan's convalescing economy has all but shattered a burst of optimism early this year when a self-sustaining economic recovery from its worst slump since World War II looked within reach.

Hayami said there was a need to be cautious over the risk of a revival in deflationary fears - a sharp contrast to August when the BOJ justified an end to zero interest rates by saying deflationary concerns had been dispelled.

"It is necessary to pay attention to whether a slowdown in the US economy will have an adverse effect on the global economy," Hayami said in a speech.

He was speaking after Japan's top economic planner said figures showing only paltry economic growth of 0.2 percent in July-September may be downgraded, raising the risk that Japan may have already sunk into another recession.

"I have heard that the numbers will be revised downward," Economic Planning Agency chief Fukushiro Nukaga told a regular news conference. "But I am not aware of the specific figures."

The Nihon Keizai Shimbun newspaper said the EPA had revised Japan's July-September gross domestic product (GDP) to a fall of 0.6-0.7 percent compared with the original estimate of a 0.2 percent rise.

The revision gives an annualised drop of 2.6 percent, against the preliminary estimate of 1.0 percent growth, and provides further evidence that a tentative recovery in the world's second largest economy has stopped dead in its tracks.

Economists are now focusing on whether September-December GDP will also show a contraction in growth, marking a dip back into recession, and if this will be enough to sway the Bank of Japan (BOJ) to revive the zero interest rate policy it ended in August.

http://www.stuff.co.nz/inl/index/0,1008,561172a13,FF.html

-- Martin Thompson (mthom1927@aol.com), December 24, 2000


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