Japan reports weaker economy
Associated Press
TOKYO — Japan's economy is weakening and its prospects are fading for a recovery from the worst slowdown since World War II, according to a closely watched government report released yesterday.
Associated Press
The report for April said the economy continues to edge toward a self-sustaining recovery. But it said slowing output at the nation's factories and mines and shrinking corporate investment in new equipment are hurting chances of a rebound.
A passerby checks out the stock ticker board on a street in Tokyo. The Nikkei Stock Average remains far below the levels of the late 1980s and early 1990s.
It was the first time since September 1995 that the government has reported that the economy is weakening.
The report also said the economy suffers from "moderate deflation" — continuing price declines. It was the second straight month that the government has warned of deflation, which can push down corporate profits and people's incomes.
Economic Minister Taro Aso said that economic conditions are severe and that a recession is "possible" in the months ahead. He urged the government to consider an extra budget to boost growth.
The grim assessment was the latest piece of bad news for the world's second-largest economy, which is in a decade-long slump.
Last week, the central bank governor, Masaru Hayami, said growth has come to a standstill, and blamed slowing exports.
Worried about the stagnant economy, the Bank of Japan moved to push interest rates to zero last month, making it cheaper for banks to borrow money.
Exports have long been the driving force behind Japan's economic growth. But the cooling U.S. economy has dampened demand for Japanese exports.
Japan also unveiled an emergency package earlier this month that set a two-year deadline for major banks to dispose of their bad loans, estimated to total 13 trillion yen ($104 billion).
The bad loans — a legacy of the collapse of Japan's asset-inflated economy of the late 1980s and early 1990s — have crippled the nation's economy.
The April report pointed to five key areas of the economy that remain depressed: industrial output, corporate profits, business sentiment, employment and housing construction.
The government downgraded its assessment of the domestic labor market to reflect the fall in job offers in February. A deterioration in the job market, near-record high unemployment and falling incomes have made consumers less willing to spend.
Another major concern is the worsening outlook of business investment — one of the main areas of private sector growth in Japan. Decreasing machinery orders in recent months indicate corporate investment in new equipment could wane later in the year.
Late last year, Japan set a target of 1.7 percent growth for fiscal 2001 through the end of next March. But private economists consider the government's forecast too optimistic.
