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Mon, Mar 11, 2002 - Page 21 News List

Japan may soon raise assessment of economy for 1Q


Japan's government is set to upgrade its assessment of the second-biggest economy for the first time since June 2000, Taku Yamasaki, the secretary-general of the ruling Liberal Democratic Party, said.

"I'm confident" the government will raise its economic forecast for the January-March period when economic ministers meet on Thursday, Yamasaki said on Asahi National Broadcasting Co's television program "Sunday Project."

The Cabinet Office may omit the word "deteriorating" for the first time in 10 months in its economic forecast to be released Thursday, as an economic recovery in the US -- Japan's biggest trading partner -- boosts exports, and manufacturers cut stocks of goods to pave the way for a revival in production.

Exports posted their biggest gain in 11 months and inventory fell to a 11-year low in January.

"Around April to June this year, the recovery in the US will help boost Japanese exports," said Atsushi Nakajima, chief economist at the Industrial Bank of Japan. "We'll see a cyclical recovery, even though Japan still has a way to go structurally."

Government figures last week showed the economy may grow in six months, as it nears a bottom. The index of leading economic indicators for January rose above the 50 percent mark for the first time in eight months. A reading above 50 points to growth.

Still, Japan exported its way out of its previous recession in February 1999 only to fall back into recession after 21 months.

Government figures Friday showed the economy contracted 1.2 percent between October and December last year -- the third straight quarterly drop -- led down by a record 12 percent slide in business spending.

Policies to help boost companies' capital spending and more measures to stem price declines may be in store, as the anti-deflation package the government announced last month was insufficient, Yamasaki said.

The Feb. 27 package repeated calls for the central bank to take "drastic steps" to boost the money supply and using the state-run Resolution and Collection Corp. to buy more of the banks' estimated ?36.8 trillion of bad loans so they can start lending again to well-run businesses.

The government plans to release additional packages, including tax-related steps such as reducing taxes on capital spending and deregulation, Yamasaki said. One such step would be to waive the tax on gifts by parents to their children of up to ?30 million to buy residential property, from the current ?5.5 million, he said. The tax ranges from 10 percent to 70 percent.

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