Japan's economy shrinks 0.8 percent
By Yuri Kageyama
Associated Press
TOKYO — Japan's economy shrank 0.8 percent for the quarter ending in June, the government said Friday, confirming growing fears about an economy in decline.
The government data on the gross domestic product show the global slowdown, especially the one in the United States, has dealt a serious blow to Japan. GDP is the value of all goods and services produced in the nation.
According to the figures released Friday, the economy shrank 3.2 percent on an annual basis in the April-June quarter, the government said.
"The economy is in a downturn," said Mamoru Yamazaki, chief economist at Barclays Capital Japan in Tokyo. "The negative figures are going to continue for the next two quarters."
Recovery will depend on the U.S. economy, but the worst isn't likely to be over until next year, Yamazaki said.
Analysts had expected the GDP figure to show about a 1 percent contraction.
Shortly after the GDP figures were released, Prime Minister Junichiro Koizumi gave the go-ahead on preparations for a supplementary budget in an attempt to rescue the economy. Koizumi had been cautious about an extra budget because he believes trimming government spending is critical for Japan's long-term recovery.
The yen amount of the supplementary budget will not be decided before October, Yasuo Fukuda, chief government spokesman, told reporters.
The Cabinet Office said public investments fell 4.1 percent while private sector investments dropped 2.8 percent, but consumer spending inched up 0.5 percent. Declining exports pushed down external demand 0.1 percent, it said.
Japan is trying to recover from a slowdown that has continued for more than 10 years. The United States and other countries are increasingly worried whether the world's second-largest economy will take enough action to turn itself around.
The Japanese economy eked out a mere 0.1 percent growth in the January-March quarter after growing 0.6 percent in the three months ending in December last year. It contracted 0.7 percent in the quarter through September 2000.
The government had set a growth target of 1.7 percent for fiscal 2001 ending next March, but officials acknowledge that achieving any growth would be difficult and that the target is unrealistic. The economy needs to grow 1.4 percent in each of the remaining three quarters to achieve 1.7 percent growth for the year.
Washington has stressed the importance of sticking to the reforms promised by the Koizumi administration. The plans include cleaning up the massive bad debts at the nation's banks, privatizing parts of the public sector and cutting back government spending.
Tokyo share prices opened lower Friday, mainly on the drop overnight on the New York stock exchange, where the Dow Jones industrial average ended down 192.43, or 1.9 percent, at 9,840.84.
Shortly after trading began, the benchmark 225-issue Nikkei Stock Average began plunging. After a half-hour of trading, it was below 10,500 points but still above the 17-year-low close reached Monday of 10,409.68 points.
Japan's economy contracted for the whole year in fiscal 1998 that ended in March 1999, shrinking 0.6 percent. It managed to grow 1.4 percent in fiscal 1999 and 1.0 percent in fiscal 2000.
This nation's woes are deeply rooted. Bureaucratic government controls and export-oriented mass production served as a momentum for Japan's glorious growth for decades, but the system is increasingly unable to keep up with global changes.
Electronics companies have been revising their earnings forecasts downward, and some big-name companies are expected to post huge losses for the fiscal year that ends in March 2002. Unemployment hit 5 percent in July, a record high since the government began keeping such data in 1953.
"All aspects of the economy are declining at once," said Ronald Bevacqua, senior economist at Commerz Securities in Tokyo.
