Gee, wasn't this, like, about 2 years ago?

http://www.boston.com/dailynews/341/world/Japan_s_economy_shrinks_for_se:.shtml

Japan's economy shrinks for second straight quarter, making recession official

By Yuri Kageyama, Associated Press, 12/7/2001 06:01

TOKYO (AP) Japan's economy shrank for a second straight quarter and slipped into recession, the government said Friday the country's third recession in a decade and the latest confirmation of a growing global slump.

Last week, the United States the only economy larger than Japan was pronounced in recession. But the fight to crawl out of recession is likely to prove more protracted here, analysts said, delivering bad news to other nations counting on solid growth from Japan.

According to government data, Japan's gross domestic product, the value of goods and services produced in a country, shrank 0.5 percent for the quarter ended in September. The drop for the third quarter translates into an annualized contraction of 2.2 percent.

Although economists had been warning about a recession for months, the report made Japan's recession official. Recession is usually defined as two consecutive quarters of economic contraction.

For the previous quarter ended in June, Japan's GDP shrank 1.2 percent, according to revised figures released Friday. Japan eked out 1.0 percent growth in the quarter that ended in March.

Analysts say the problems Japan faces are more severe than those for the United States. To bail out its economy, Japan needs basic change such as cleaning up banks' bad debts, easing government regulations to encourage competition and ending the pork-barrel public works spending of old-style politics, they say.

Masaaki Kanno, chief Japan economist at J.P. Morgan in Tokyo, believes Japan will record four more quarters of economic contraction.

''The decline in consumption symbolizes the entire worsening economy,'' Kanno said. ''The recession and minus growth are likely to continue.''

The country is caught in a dismal cycle of sliding incomes leading to weakening spending, which in turn sends revenue at companies dropping, said Kanno, who predicts Japan's economy will contract 1.3 percent for this fiscal year ending in March. Last month, the government gave up its initial target of 1.7 percent growth for the fiscal year and acknowledged the economy would probably contract 0.9 percent.

The last time Japan dropped into recession was in the first half of 1998, according to recent revisions of government data. Japan also went through three straight quarters of contraction in 1993.

Japanese ministers played down fears about the recession. Finance Minister Masajuro Shiokawa said the figures were ''better than expected.'' Economy Minister Heizo Takenaka called them ''within expectations.''

Earlier this week, the Cabinet Office acknowledged the economy won't start growing for two or three years, until the completion of reforms promised by Prime Minister Junichiro Koizumi.

The government has little leeway for any quick fixes.

Although a second extra budget is in the works, Tokyo must keep spending in check to nip the ballooning public debt. The central bank slashed interest rates to zero in March. Also, cultural pressures to avoid the layoffs more common in the United States are obstacles to speedy shifts in the private sector to bring profits and cut costs.

Some of the top names in electronics that were for decades Japan's leading industry are now bleeding tens of millions of dollars in losses, beaten by the global downturn. The Tokyo stock market is languishing at 17-year lows. Unemployment is rising as well.

Unlike the United States, Japan is also burdened with deflation a situation in which prices continue to fall, making debts heavier and further pushing down spending, profit and income.

''As long as deflation exists, we can't hope for strong recovery,'' said BNP Paribas Chief Economist Ryutaro Kono. ''It will be some time yet before we begin to see recovery.''

-- Anonymous, December 07, 2001