Japan's recovery faltering, IMF says
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Japan's gross domestic product will probably fall 0.5 percent this year and may sink further unless the government deals with banks' bad debts and other economic burdens, the International Monetary Fund said.
"Recovery is likely to be short-lived unless Japan's deep-seated structural problems in the bank and corporate sectors are urgently and comprehensively addressed," the IMF said. "Complacency must be avoided at all costs, as this would only serve to prolong Japan's decade of stagnation."
The IMF report casts further doubt on Japan's effort to rebound from its third recession in 10 years. The economy grew 1.4 percent during the first quarter, thanks to fiscal stimulus and robust exports and household spending, after a 0.5 percent contraction in GDP last year, the IMF said.
The economy now is faltering, and the "sharp increase in private consumption and public investment in the first quarter are unlikely to be sustained during the rest of the year owing to the uncertain employment outlook and an expected withdrawal of the fiscal stimulus," the IMF said.
The Japanese government said yesterday the nation's economy was showing some signs of recovery despite continuing difficulties with stalled demand at home, and left its monthly economic outlook unchanged in August.
The Cabinet Office said the nascent recovery was driven by surging exports to all regions, including the United States, Europe and the rest of Asia.
But there was still little hope for growth stimulated by demand at home, as private consumption remained flat, the unemployment rate hovered at a near-record 5.4 percent and investment declined despite indications of a bottoming out ahead.
A slowdown in growth of American consumer spending is a major cautionary sign for Japan's economy, government official Jun Saito said. Saito also warned the fledgling recovery in Japan is fragile.
"When we speak about signs of recovery," he said, "they are on a scale that must be looked through a microscope."
