Report Shows Japanese Economy Had First Growth Since 1997
By THE ASSOCIATED PRESS -- June 10, 1999
TOKYO -- Massive public works spending helped
Japan's economy reverse itself in the first three months
of this year, with the government reporting Thursday an
unexpectedly strong 1.9 percent growth rate -- the first sign
of growth since the summer of 1997.
While hardly torrid, the January-March gross domestic
product increase surprised many economists and was well
above the 0.8 contraction in the last three months of 1998 --
the fifth straight quarter of decline.
Officials welcomed the data as a positive sign, but said the
government will continue attempts to spur a full recovery
from the country's worst recession since World War II.
"We will continue to watch the direction of the economy,"
said chief government spokesman Hiromu Nonaka.
The spurt marked an end, though perhaps only temporarily,
to Japan's prolonged slump.
If the growth pace set in the last quarter were to continue --
and few think it will -- GDP would expand a respectable 7.9
percent this year, the government said. That's compared to
last year's contraction of 2.0 percent.
The government's official forecast calls for 0.5 percent
growth in the current fiscal year, which ends in March 2000.
Haruhiko Kuroda, a top-ranked Finance Ministry official,
gushed that the growth in the measure of all goods and
services produced in the country was "really great."
But Economic Planning Agency head Taiichi Sakaiya noted
that record-high unemployment and efforts at structural
reform need close watching.
Separately, a draft plan released by the ruling party
Thursday set a goal for creating 750,000 public and private
sector jobs. The government was expected to formally unveil
the plan on Friday.
April's unemployment rate among men hit a record 5 percent
while Japan's overall jobless rate remained steady at a record
high of 4.8 percent.
With few prospects for a quick turnaround in
unemployment, the latest GDP number came as good news
for Prime Minister Keizo Obuchi, who pledged last summer
to engineer a full recovery within two years.
Obuchi will be able to show that Japan is living up to its
commitment to prod its economy when he meets with the
heads of the other major industrialized nations and Russia
later this month in Germany.
Economists in Tokyo had expected, on average, a 0.1
percent contraction in the first quarter.
But massive spending on public works apparently managed
to stop the economy from shrinking further and even fueled
the growth.
Private consumption and capital investment were better than
expected but still not strong enough to drive the economy
without help from public coffers, the government said.
"It arguably shows that fiscal policy is having a substantial
impact on the economy, despite views that the policy would
be largely ineffective," said Yasushi Okada, chief economist
at Credit Suisse First Boston.
The figures indicate that the economy may have bottomed
out, he said.
Others were less sure.
"These numbers aren't in line with other economic indicators
that came out during the period. I would be skeptical," said
Andrew Shipley, economist at Schroders Securities (Japan)
Ltd.
The figures jolted Japan's financial markets. Tokyo shares
surged and the dollar sank against the yen after the GDP
numbers were leaked by a local paper just before the close
of trading on Thursday.
The Nikkei Stock Average climbed 480.12 points, or 2.89
percent, to 17,102.62. The dollar dipped as low as 117.63
yen, but rebounded above 119 yen on reported intervention
by the Bank of Japan to support the dollar.
In early afternoon trading in New York, the dollar had
drifted back to 118.63 yen.
Copyright 1999 The New York Times Company |
