Posted on: Tuesday, June 19, 2001

Japan showing more signs of economic slowdown

Associated Press

TOKYO — The Bank of Japan lowered its assessment of Japan's economic prospects yesterday in the latest sign of growing worries.

The Bank of Japan report said falling exports have hurt production and weakened the corporate sector. Exports, long the engine for growth, are dipping because of a slowdown in the United States and Asia.

Falling production has reduced corporate profits and overtime pay for workers, which in turn will probably bring down consumer spending, the report said.

The report follows a report Thursday from the Cabinet's office warning that Japan's economy is deteriorating — downgrading its economic assessment for the fifth straight month.

The use of the word "deteriorating" was harsher than the typically more benign descriptions of the economic situation as "weakening" or "improvement ... is stalling."

The frankness is widely viewed as reflecting the policies of the new administration of Prime Minister Junichiro Koizumi, who has promised to carry out painful reforms to get the economy going in the long run.

The central bank's report for June was less blunt, but said adjustments in economic activity are "gradually intensifying."

Last week, the government said the economy shrank 0.2 percent for the quarter ending in March, showing that the gross domestic product grew only 0.9 percent in the entire fiscal year — lower than the government's target of 1.2 percent expansion.

Economy Minister Heizo Takenaka has said it is probably impossible to reach the government target of 1.7 percent growth for the current fiscal year, ending in March 2002.

Koizumi has promised to rein in public spending while cracking down on banks' loose lending practices that have sent bad debts soaring for years. Corporate bankruptcies and unemployment are expected to soar while economic growth stalls.