IMF growth forecast for Japan no surprise -analyst
Reuters Story - December 21, 1997 02:12
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By Jon Herskovitz
TOKYO, Dec 21 (Reuters) - An IMF report which forecasts
Japanese economic growth of just 1.1 percent in the next
calendar year, far lower than government predictions, is no
surprise, economists said on Sunday.
In its revised World Economic Outlook report published on
Saturday, the International Monetary Fund said the Japanese
economy would grow by 1.1 percent in 1998 compared with 1.0
percent in 1997. As recently as October, it had forecast 1998
growth at 2.1 percent and 1997 growth at 1.1 percent.
"The initial report was hedged in all sorts of caveats,"
said Marshall Gittler, head of economic research at SBC Warburg
Japan Ltd. "The revised figures are much more reasonable."
He said the latest figures were much more in line with
figures forecast by private financial firms.
A rise in Japan's sales tax in April, recent failures of
Japanese financial institutions and the economic woes of other
Asian nations have been blamed for the country's slowdown, and
economists say the effects are expected to linger into the next
fiscal year.
Government officials, however, have insisted that while
growth this business year would be flat, December's fiscal
measures would prevent future financial failures and help the
economy to grow by nearly two percent in the next fiscal year.
The Economic Planning Agency (EPA) said on Saturday that it
was expecting Japan's gross domestic product (GDP) to grow 1.9
percent in fiscal 1998/99, which starts next April 1.
The EPA, which had earlier forecast growth of 1.5 percent
for the next fiscal year, said on Saturday that a one-time tax
cut of 2 trillion yen ($15.6 billion), announced by Prime
Minister Ryutaro Hashimoto last week, should push up growth by
around 0.4 percentage points.
Japan last week announced a third package of economic
stimulus efforts, including a tax cut, the issuance of at least
10 trillion yen ($77.8 billion) worth of bonds to help stabilise
the nation's frail banking system as well as steps to help small
and medium-size businesses.
As a result of the tax cut and the resulting drop in tax
revenues, Japan had to settle for a smaller-than-expected
reduction in deficit-financing bond issues in its draft budget
adopted by the cabinet on Saturday.
IMF chief economist Michael Mussa described the stimulus
package as "a step in the right direction, an important step."
But he cautioned that there was no way of knowing whether
the package to strengthen the banking sector would provide
enough money and it was also not clear how the funds would be
used.
Private economists said they expected more corporate
failures both inside and outside the financial sector, itself
plagued by bad loans and high funding costs as creditors boost
lending rates to offset risk.
On Friday, the Tokyo stock market's main barometer, the
225-share Nikkei average, plummeted 846.75 points or 5.24
percent to close at 15,314.89 after the failure on Thursday of
medium-sized foodstuffs trader Toshoku Ltd Ltd.
Investors feared that Toshoku's collapse -- the ninth
failure of a listed firm this year -- reflected a deepening
credit crunch ahead of the introduction of stricter capital
adequacy standards and planned financial deregulation.
The IMF's Mussa said there was a risk the growth forecasts
could be revised downward again if problems with business
confidence and difficulties in the financial sector persisted.
"The risks are on the downside but there's a bit of
potential on the upside as well," he said, citing Japan's highly
competitive export sector that could counterbalance problems in
other areas of the economy.
The IMF report said an intensified slowdown in Japan, with
aggravated problems in the already seriously troubled financial
sector carried the risk of potentially spilling over to other
countries.
Economists in Tokyo agreed that further problems in Japan's
banking sector and a drop in consumer confidence was likely to
cut into Japan's economic growth in 1998, which might in turn
have implications for Asia's recovery from this year's crisis.
"Japan is not likely to be the engine that will pull these
countries out of their current economic difficulties," Gittler
said. |
