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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (53696)	6/11/2000 10:43:00 PM
From: UnBelievable	Respond to of 99985

Japan's Economy Grew 2.4% In January-March Period By BRIAN FOWLER Dow Jones Newswires TOKYO -- Score one for Japan's economic recovery. Rebounding from two successive quarters of poor performances, the Japanese economy surged a quarterly 2.4% in the January-March period, for an annualized 10% pace of expansion, according to data released Friday. The growth rate was a bit below the consensus projection of a 2.8% quarterly rise. But it was the fastest pace of quarterly expansion in Japan in four years and it brought cumulative growth in the fiscal year ended March 31 to 0.5% -- just a touch below the government's 0.6% target. Japan's Quarterly GDP Data Are Expected to Show Growth Notably, the economy managed the gains apparently without the help of public investment, which fell a quarterly 7.5%. That would suggest a large part of the public investment in last year's 18 trillion yen ($169.76 billion) fiscal stimulus package will filter into the April-June quarter, enabling the economy to achieve further growth, analysts said. Election Advantage Members of the ruling Liberal Democratic Party who are gearing up for a June 25 general election are likely to cite the data as signs of how government policy has finally managed to kindle a recovery led by consumer demand. Even with the fall in public investment, domestic demand added 1.5 points to growth, reflecting a 1.8% rise in personal spending, a 6.6% jump in housing investment and a 4.2% increase in capital spending compared with the previous quarter. Prime Minister Yoshiro Mori said the figures showed that government policy has been effective. He also promised to continue with the sort of expansive policies needed to ensure that the economy continues to grow this year. "The key isn't the specific figure, it's that we achieved positive growth. In order to ensure without a doubt that we attain plus growth again this year, we will continue with the proactive policies we've conducted up until now," Mr. Mori said. The 0.5% GDP growth this last fiscal year ended a two-year recession. The government is aiming for 1% GDP growth this year. Investors reacted with mild disappointment to the data, selling Japanese stocks and dumping the yen. The Nikkei Stock Average fell 184.46 points to close at 16819.88, while the U.S. dollar, after starting the day at 105.90 yen, rose as high as 106.55 before drifting back to 106.20 yen late Friday in Asia. Persistent Deflation Friday's data could strengthen Japan's resolve to resist any calls for further fiscal pump-priming that might arise when finance ministers and heads of state gather for two separate meetings of the Group of Seven leading industrial nations in Japan next month. However, analysts were quick to point out that the spending and investment figures were bolstered by the additional day resulting from a Leap Year calendar. The Economic Planning Agency said the Leap Year effect boosted final demand by 0.8%. Japanese policy makers can't be sure that a sustainable recovery is underway until they see steady growth in incomes, economists say. "We've seen some stability in incomes lately, but going forward we could see a production slowdown due to a buildup in inventories. That could reverse the progress on incomes," warns Matthew Poggi, an economist at Lehman Brothers in Tokyo. Friday's data contained fresh signs of deflation -- another concern that throws into question the likelihood of a sustained recovery. The GDP deflator, which tracks general price trends, stood at minus 1.7 points in the latest quarter, below the minus 1.4 recorded in the previous quarter, and well below the positive 0.2 point reading in the October-December quarter 1998, when Economic Planning Agency chief Taichi Sakaiya warned that the economy was on the brink of a deflationary spiral. The upshot for monetary policy is that the Bank of Japan will likely resist the urge to abandon its zero interest-rate policy for now. The figures showed deflation is "alive and kicking," said Jesper Koll, chief economist in Japan for Merrill Lynch. "There is too much deflation to lift rates," he added. In a news conference after the release of the data, Finance Minister Kiichi Miyazawa said the government would have to look at April-June economic figures before deciding on whether to compile a supplemental budget for this fiscal year. Analysts said if the government does decide to put together another package, it will decrease the likelihood of a central bank rate increase this year.