Japanese Economy Shrinks Again
TOKYO (AP) -- Japan's economy shrank for a record fifth
straight quarter, the government said Friday in a report likely
to increase pressure for efforts to propel the economy out of
its worst recession in 50 years.
The announcement of the 0.8 percent drop in gross domestic
product in the October-December quarter came as a
government panel approved a 7.5 trillion yen ($62.5 billion)
bailout package on Friday for 15 of its largest banks.
The bad-loan cleanup, using taxpayer money, is the
cornerstone of a government plan to pull the country out of
its worst recession since World War II.
The figures on GDP -- the measure of all goods and services
produced in the country -- showed that the economy will
shrink 3.2 percent in the 1998-99 fiscal year if the pace
continues.
That would mark the first time the Japanese economy has
contracted for two fiscal years in a row since the end of
World War II. The economy shrank by 0.7 percent for the
1997-98 fiscal year, which ended March 31, in the first
full-year decline since 1974.
For the July-September 1998 quarter, the GDP contracted
0.3 percent.
The dismal show is likely to set off calls for Tokyo to do
more to turn the economy around, said Kenneth Landon,
senior currency strategist at Deutsche Bank in Tokyo.
''The fact that these figures were so much worse than
expected leads me to believe that the government has
underestimated the economy's weakness up until now,''
Landon said.
Government officials, however, played down the need for
more action.
''The Cabinet is proceeding with every conceivable policy
measure. We're starting to see results here and there,'' said
chief government spokesman Hiromu Nonaka.
With unemployment at a record high 4.4 percent and a credit
crunch squeezing companies, the Japanese government has
already earmarked 81.9 trillion yen ($682.5 billion) in the
budget for the next fiscal year for public works spending, tax
cuts and other stimulus measures.
In one sign of good news, a research company said Friday
that corporate bankruptcies were down last month.
Plunging 40 percent compared to a year earlier, the number
of bankruptcies dropped below 1,000 for the first time in six
years, Teikoku Data Bank said. Bankruptcies have fallen
since October, when a loan-guarantee system for small and
medium-sized companies was set up.
Finance Minister Kiichi Miyazawa said the massive bank
bailout would put the financial industry -- hobbled by at least
70 trillion yen ($584 billion) in bad loans -- on track to
recovery.
''With the injection of public funds, we are now about to
achieve stability in the financial system,'' he said, adding that
the economy ''may now have turned the corner.''
But analysts said things were unlikely to get better soon.
Brian Rose, chief economist at Warburg Dillon Read in
Tokyo, said he expected the economy to continue to shrink
for at least another two years.
Jeffrey Young, an economist at Salomon Smith Barney in
Tokyo, said he also remained cautious. ''The economy is
still very, very fragile,'' he said.
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