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Thu, Feb 17, 2005 - Page 12 News List

Japan denies economic recession

`TECHNICALITIES' The official figures show that the Japanese economy was in recession for most of last year, but pundits say Japan isn't ready to use `that word'


A Japanese businessman looks at laptop computers in an electronics store in downtown Tokyo yesterday. The Japanese economy entered a technical recession after previous GDP figures were revised down to show three consecutive quarters of negative growth hit by slower exports and consumption, the Japanese Cabinet Office announced.


The Japanese economy was in recession for most of last year as official figures yesterday showed three successive quarters of negative growth, upsetting forecasts as slower exports and consumption hit output.

The Cabinet Office said the economy shrank 0.1 percent in the three months to December compared with the previous quarter, giving an annualized drop of 0.5 percent.

Analyst forecasts had been for 0.1 percent and 0.5 percent growth.

Net exports -- exports minus imports -- and consumer spending each contributed a negative 0.2 percentage points to the GDP data in the period.

The government also revised the July-September quarter figures to a 0.3 percent contraction from the previous estimate of 0.1 percent growth, following a fall of 0.2 percent in the previous three months, so putting the country into recession.

The widely accepted technical definition of a recession is two consecutive quarters of economic contraction but officials said the government was not ready to use the word as Japan worked on figures that include more than just GDP data.

The three quarters' downturn is the worst since the economy contracted for four consecutive quarters from April to June 2001, to January to March 2002, when it was hit by the bursting of the information technology bubble.

For the whole of last year, however, GDP expanded 2.6 percent, the highest growth rate since 1996, when it was up 3.4 percent.

"There is no change to our understanding that the economy is basically on a gradual recovery path," Prime Minister Junichiro Koizumi said.

"The economy has some soft patches but if you look at the bigger picture, it is in a recovery stage," Economic and Fiscal Policy Minister Heizo Takenaka said.

Takenaka said he would not say the economy was in recession "because we cannot make a call by just looking at the GDP figures. We make a more comprehensive judgement."

Japan uses GDP figures, diffusion indices and other data to assess the state of the economy, Cabinet Office officials said.

"The current conditions are mostly in line with our view of the economy -- it is largely leveling off in a slightly softer tone," Takenaka said.

Economists said depressed consumer spending in the last quarter of last year was due to a series of natural disasters, such as a devastating earthquake and a record number of typhoons, along with a relatively warm start to the winter.

A quake measuring 6.8 on the Richter scale jolted the northern province of Niigata on Oct. 23, leaving 40 people dead and 2,857 injured while disrupting production at several major companies.

Officials also noted positives in the figures, with the broad measure of inflation -- the GDP deflator -- showing a fall of 0.3 percent from a year earlier, a marked improvement on the minus 1.3 percent of the previous quarter.

"Mild deflation is continuing but there are also signs that it is moving towards the exit," Takenaka said.

Another positive was corporate capital spending which rose 0.7 percent in the three months to December after 0.4 percent growth in the previous quarter.

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