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Minister sees Japan’s economy continuing recovery next year

IN JAPAN

JAPAN’S economy is likely to continue growing next year, Minister for Economic and Fiscal Policy Hiroko Ota suggested yesterday, dismissing growing fears that it could plunge into recession as a result of an expected global slowdown in 2008. But she acknowledged a number of longer-term challenges to the continued growth of the economy.

Ms Ota spoke of an eventual ‘crisis’ facing the economy, because of lagging productivity and an ageing population, but added that the economic recovery that began in 2002 should continue next year. Prime Minister Yasuo Fukuda’s government will come up with a new growth strategy next month, she said. Polls published yesterday showed, however, that voter support for Mr Fukuda’s government has plunged to 35 per cent, within months of its coming into office to replace the short-lived administration of former prime minister Shinzo Abe. The prospect of a general election next month has increased, analysts say, adding political uncertainty to the country’s economic woes.

Meanwhile, further gloom enveloped the Tokyo stock market where the benchmark Nikkei 225 average tumbled for a fourth consecutive trading day, shedding 1.7 per cent to end at 15, 249.79. Sentiment was hit by official data showing that a diffusion index of economic indicators for October had been revised downwards and that wages also declined in that month.

Economic growth in Japan fell to just 0.4 per cent in the third quarter, and many analysts fear that it could soon turn negative given that only exports are providing impetus to growth now. With the prospect of a significant downturn in the US economy, on the heels of the sub-prime mortgage crisis, Japan cannot rely on continuing strong external demand, they say.

Speaking at the Foreign Correspondents Club of Japan, Ms Ota said: ‘I believe the economy will continue to recover in 2008,’ citing an expected pick-up in housing activity following a crash in construction activity this year because of tighter building regulations. But she declined to specify what policy tools are available to fight recession, given the country’s strained fiscal situation and already very loose monetary policy.

The government is focusing on longer-term challenges, including low productivity in Japan’s service industries and in agriculture, she said. The new official ‘growth strategy’ due to be published next month will address these issue, Ms Ota promised. A new strategy for raising the contribution of financial services to gross domestic product is also due to be unveiled soon, she added.

 

Source: Business Times 18 Dec 07

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