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To: Alex who wrote (35051)	6/10/1999 7:36:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116764

Back in the black: Japan surges By Andrew Cornell, Tokyo Japan's economy surged back into positive territory in the March quarter for the first time in 18 months, growing at an annualised rate of an extraordinary 7.9 per cent. Stronger-than-expected capital expenditure and private consumption allowed the economy, as measured by gross domestic product, to expand1.9 per cent more than double the highest market expectations. The release of the shock data had an immediate effect on foreign exchange markets, with the Japanese yen and the Australian dollar rising sharply against the US dollar. The yen moved from 119.50 to 117.57 against the $US after the data was progressively leaked into the market, while the Australian currency surged more than half a US to US66.20. Despite the strong data, the Japanese Government's Economic Planning Agency remained cautious. It said future declines could not be ruled out. Mr Takafusa Shioya, the deputy director general of the EPA, said government steps to support the economy were the main factors supporting growth in the period. Government spending grew 10.3 per cent in the quarter, after 10.6 per cent growth previously. Economists, who on average predicted 0.23 per cent GDP growth, were quick to cast doubt on the integrity of the number, which would rank Japan among the fastest-growing economies in the industrialised world. "There is no way the economy grew 1.9 per cent in the first quarter," said an ING Barings economist, Mr Richard Jerram. "However, there is also no way the economy shrank 0.8 per cent in the last quarter. What this shows is there is no connection between Japanese GDP and the Japanese economy," he said. "If the economy grew that fast, you would have seen it and there was no sign of it in the first quarter." A Warburg Dillon Read economist, Dr Brian Rose, said although the number itself was unbelievable, there was room for a surprise on the upside. Leaked reports of the astonishing GDP growth fired the benchmark Nikkei 225 market index through 17,000 points for the first time since May 6 while the yen appreciated 2 against the dollar. Most surprising in the data was the domestic component of the growth, up 2.2 per cent compared with a 0.5 per cent fall for the previous quarter. Stronger-than-expected corporate investment, housing and personal consumption were behind it. Along with private spending and housing investment, corporate spending and imports were positive. Economists were reluctant to make too much of the first signs of growth in a year and a half, saying there remained little sign of a self-sustaining recovery. But there will now be a round of upgrades to forecasts for the year ahead, with many economists likely to call an end to the recession next quarter. Two successive growth quarters are necessary for an official end to the recession . "This is what is called a technical recovery," said Warburg Dillon Read's Dr Rose. "What it really means is difficult to say, but it is a sign of something at least that the serious decline of last year has stopped." What concerns economists is that there is still little sign of life outside the government support. It is now widely assumed that as well as a special employment package to be announced tomorrow, the Government will have to announce a second supplementary Budget later in the year of about 4.5 trillion. "These fiscal stimulus measures already announced will start to fade in the late [northern] summer and fall," said Nikko Salomon Smith Barney economist Ms Yukari Sato. "We are not very optimistic after that." Ms Sato said she expected consumption to remain weak, and Nikko SSB still did not expect the economy to achieve the Government's forecast of 0.5 per cent growth for the year ending March 2000. Economists said the strong capital expenditure figures that were behind the strong growth in the last quarter would peter out as almost all corporate surveys had shown Japanese companies planned to cut back on capex this year. Machinery order data, also released yesterday, was worse than expected at -14 per cent month on month compared with market forecasts of -2 to -12 per cent. Core machinery orders to Japanese makers fell by an adjusted 13.8 per cent in April from the prior month to 758.43 billion the lowest amount for a single month in nearly 12 years, the Economic Planning Agency said Thursday. Machinery orders are widely regarded as a leading indicator of corporate capital investment. afr.com.au

To: Alex who wrote (35051)	6/10/1999 7:40:00 PM
From: goldsnow	Respond to of 116764

Dollar/yen closes U.S. up after BoJ intervention NEW YORK, June 10 (Reuters) - Dollar/yen closed firmer for the fist time this week as investors backed away from fresh yen buying, frightened by central bank intervention overnight. But dealers predicted the gains would not last as Japan presented new signs of growth at a time the U.S. economy appears on the verge of overheating and the Federal Reserve may be forced to raise official interest rates later this month. At the end of the day, however, events including healthy Japanese gross domestic product and the end of NATO's 79-day bombing campaign of Yugoslavia were barely reflected in closing prices. Dollar/yen closed at 119.10/20, up from 118.95/05 and comfortably above the seven-week lows it reached near 117.64 after the Japanese data. But it was also off the 119.92 high touched after the Bank of Japan sold yen for dollars. Euro/dollar closed virtually unchanged at $1.0477/84 from $1.0476/81, holding below the $1.0523 session high reached after NATO Secretary-General Javier Solana said air raids would be suspended as Serb troops began to withdraw from Kosovo. ''If one had slept through the night, one could think there was very little going on,'' Citibank analyst Robert Sinche said as the dollar settled into sideways trade late in the day. News that Japan's gross domestic product grew a real 1.9 percent in the January-through-March quarter from the previous quarter, or 7.9 percent on an annualized basis, sparked fresh yen buying overnight. Economists who until a few days ago had forecast a slight contraction said the data suggests Japan is on the road to recovery. To keep a surging yen from choking off fragile growth, the Bank of Japan sold yen for dollars, entering the open market for the first time in five months. The surprise move helped the dollar rally toward 120 yen, but its impact was limited. ''People were shocked by the numbers and then frightened by the intervention, but I expect the market to test the dollar's downside again soon, probing whether the intervention was for real,'' Sinche said. Outgoing Treasury Secretary Robert Rubin helped keep the dollar on even keel in late trading by saying nothing had changed in America's desire for a strong dollar and confirming that Washington had not participated in Tokyo's intervention. New U.S. retail sales and producer price data, expected early Friday, will hold the key to the dollar's short-term movements, dealers agreed. ''It is probably not going to be a quiet end to the week,'' feared on dealer, predicting that another sharp sell-off in U.S. asset markets could send dollar/yen back to 117.64 and euro/dollar to $1.0540. The Dow Jones industrial average closed lower for the third consecutive day, posting a 69 point drop to 10621.27. And U.S. Treasuries sold off sharply leaving the benchmark 30-year Treasury bond yield to breach 6 percent again as dealers expect the Fed will likely raise its federal funds rates from 4.75 percent at its June 29/30 meeting. ''There are enough signs, so they could do it,'' another dealer said. In Germany, the euro bloc's largest economy, unemployment fell to 3.998 million in May on an unadjusted basis from 4.145 in April while industrial output for April rose a seasonally adjusted 1.0 percent from March. Leading officials from the European Central Bank also lent the new currency support by hammering home a message that the euro has room to rise. In other trading the British pound shrugged off an unexpected interest rate cut to end higher at $1.6045/55 from $1.6020/30. The dollar nudged up to 1.5218/28 Swiss francs from 1.5215/25 but fell against the Canadian dollar to C$1.4622/32 from C$1.4690/00. The Australian dollar closed at $0.6613/18 off its $0.6630/40 open. biz.yahoo.com