Posted at 8:41 p.m. PST Saturday, February 5, 2000

Japan warns of return to technical recession

TOKYO, Feb 6 (Reuters) - Japan's output probably shrank in the final three months of 1999 for the second quarter in a row, technically plunging the world's second-biggest economy back into recession, Economic Planning Agency (EPA) chief Taichi Sakaiya said on Sunday.

``October-December growth will be on the minus side because of sluggish consumer spending, which was affected by a drop in winter bonus payments,'' Sakaiya told TV Asahi.

Consumer spending accounts for 60 percent of gross domestic product, the total output of goods and services.

Concerns about possible millennium bug computer problems also reduced spending on big ticket items and services, Sakaiya said.

After surprisingly strong growth in the first half of last year ended Japan's deepest recession in half a century, output fell one percent between July and September. Recession is usually defined as two consecutive quarters of shrinking production.

But Sakaiya expressed confidence that the government, which is counting on a healthy economy in the run-up to elections that must be held by October, would meet its growth forecast for the full fiscal year ending on March 31.

He said the economy was likely to do better in the current quarter, putting the government's full-year forecast of 0.6 percent growth within reach.

The government, which in December unveiled an 18 trillion yen stimulus package to underpin the economy's still-tentative recovery, is forecasting one percent growth next fiscal year.

A contraction in the October-December quarter when data are released sometime in March would not surprise most economists given the weakness flagged by official consumer spending surveys.

But Richard Jerram, an economist with ING Barings in Tokyo, said the data were of poor quality and must be treated with caution.

``The idea that the Japanese economy fell back into recession in the second half of calendar year 1999 is about as absurd as the claim, from published GDP data, that it boomed in the first half of the year,'' Jerram wrote in a weekly report.

Official statistics showed GDP growth of 1.5 percent in the first quarter of calendar year 1999 and one percent in the second quarter.

Jerram said the way the consumer spending component of GDP was calculated was particularly unreliable.

``Faults in the household spending survey which provides most of the information on consumer spending are that it covers a small and frequently changing sample of households, and it is overly detailed so the survey is probably not answered diligently,'' he said.

Japan is emerging haltingly from a decade of underperformance, caused by the bursting of an asset-price bubble created in the 1980s, and is under immense pressure from its international partners to ensure it does not slide back into recession.

In fact, Jerram said a vast array of other data -- on industrial production, inventories, labour demand, foreign trade, corporate profits and machinery orders -- all pointed to growth having started in the third quarter of last year and having continued in the fourth quarter

http://www.sjmercury.com/asia/docs/055690.htm

-- Martin Thompson (mthom1927@aol.com), February 06, 2000

Answers

(More downward economic news for Japan)

TOKYO, Feb 15, (Reuters) ~snip~ .... corporate bankruptcies jumped 44 percent in January from a year earlier to 1,441. Total debts left by bankrupt firms fell by a fifth to 604 billion yen ($5.56 billion) but remained high, said credit agency Teikoku Databank. ~snip~

Canoe News, Canada

http://www.canoe.ca/ReutersNews/ECONOMY-JAPAN.html

-- Lee Maloney (leemaloney@hotmail.com), February 15, 2000.