Posted on: Thursday, October 10, 2002
Slow growth in exports trips up Japan recovery
By Yuri Kageyama
Associated Press
TOKYO — Japan warned yesterday that the slowing pace of export growth caused by a faltering U.S. rebound may be endangering the nation's gradually emerging recovery.
Shortly before the government released its monthly economic report, Tokyo shares slid to a new 19-year low as fears continued to grow that Tokyo's decision to speed up the cleanup of bad bank loans might also speed up corporate collapse.
The Cabinet Office kept its overall assessment of the economy unchanged in October from last month, saying conditions were "more severe" despite some signs of improvement — the third straight month it has maintained that view.
But the government urged caution, given the dwindling pace of the U.S. recovery. Reiterating its view from September, Japan said the plunge in global stock markets was another reason for concern.
Senior government official Jun Saito said the momentum for exports had diminished even as slight signs of improvement were appearing, such as improved corporate sentiment and employment gains.
"There are two sides to the situation and the balance remains subtle," Saito said. "It all depends on how the balance will play out. Many scenarios are possible."
Exports were still growing, but the tempo of growth had dulled, especially in electronics products and cars. Although Japan's unemployment rate remains at a near-record 5.4 percent, jobs were gradually being added, Saito said.
Japan has been stuck in a slowdown for more than 10 years. The government has repeatedly promised reforms and is planning to step up efforts to tackle the massive bad debts at the nation's banks.
The promise to speed up the bad loan cleanup has stirred fears about corporate failures, including even major banks, and the anxiety has helped send share prices plunging in Tokyo.
The main barometer for the Tokyo Stock Exchange, the 225-issue Nikkei Stock Average, lost nearly 2 percent yesterday to drop to its lowest close since June 10, 1983. The Nikkei lost nearly 4 percent Monday.
Analysts say that the sliding share prices, intensifying bad-debt disposal and weakening export growth are likely to erode capital investments at companies, forcing a quicker-than-expected end to the fragile recovery.