FOCUS-Japan economy stuck, financial fears persist
By Linda Sieg
TOKYO, Nov 28 (Reuters) - Japan's economy appears to be going nowhere fast according to data unveiled on Friday, but authorities insist no more financial failures are imminent after Monday's collapse of giant Yamaichi Securities.
''At the moment, I see no financial institutions which will have trouble continuing their business,'' Finance Minister Hiroshi Mitsuzuka told a morning news conference.
Echoing a rare joint statement of assurances issued on Wednesday evening, Mitsuzuka said the ministry and the Bank of Japan stood ready to provide sufficient liquidity to the market to ensure financial firms would not have problems paying back depositors.
Financial jitters aside, fresh data unveiled on Friday suggested that the real economy is still teetering on the edge of recession.
The Economic Planning Agency (EPA) said Japan's jobless rate hit 3.5 percent in October, a return to the record high-level for the first time in three months.
''We judge that employment conditions have become a bit severe,'' EPA chief Koji Omi told a news conference after the data came out.
Data released separately by the Trade Ministry, meanwhile, showed industrial output fell a preliminary 0.4 percent in October from the previous month, in line with expectations but hardly a cheering number.
The ministry said it expected manufacturers' output, a key component of industrial production, to fall 2.2 percent in November before rising a slender 0.9 percent in December.
''These numbers suggest that we are going to have very weak numbers, not only for the current month but also for the third quarter,'' Aaron Cohen, chief financial economist at Daiwa Institute, told Reuters Financial Television.
''On the whole, this is putting a great deal of pressure on government policymakers,'' he added.
Retail sales fell 1.0 percent in October from the previous year, the seventh consecutive monthly decline.
Some economists worry that Japan's rash of financial failures and fears of more to come are further dampening consumer sentiment, already cooled by higher taxes and concerns about the economy and job security.
Tokyo share prices, meanwhile, drifted marginally higher in the morning, buoyed by short-covering in financial issues as trade showed signs of calming down after the recent string of high-profile failures in the industry.
The market's key barometer, the 225-share Nikkei average, ended the morning session up 143.55 points, or 0.86 percent, at 16,746.75.
The key overnight call rate, the rate at which banks lend to each other overnight, fell back sharply to 0.40 percent after jumping to 0.85 percent on banking jitters.
Dealers attributed the fall to an ample injection of funds into the money market by the Bank of Japan.
Banking worries, however, supported the dollar against the yen. The greenback was trading around 127.70 yen late in the morning, up nearly one yen from the opening.
Hopes are still rising that the government will finally decide on the politically tricky manoeuvre of deploying public funds to stabilise the financial system, analysts said.
Mitsuzuka, echoing comments by Prime Minister Ryutaro Hashimoto, said any use of such funds should not contradict the government's plan to cut its huge budget deficit over time.
He added that authorities would have to clarify the aim of using such funds to gain public acceptance.
Recent financial upsets have boosted support in the market and among experts for the controversial step, which has been political anathema since a huge outcry greeted a decision last year to use tax money to help wind up failed mortgage firms known as ''jusen,'' which were non-deposit taking institutions.
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