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To: Johnny Canuck who wrote (37051)	5/19/2002 2:27:50 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69822

Tokyo Sees End of Recession, but Others Are Not so Sure By KEN BELSON May 18, 2002 OKYO, May 17 — Japan's government signaled today that it believed that the country's third recession in the last decade had ended, joining a growing band of optimistic forecasters in the private sector. But many experts suspect that the government's outlook is born more of political pragmatism than economic analysis. In its monthly report for May, published today, the government said that conditions remained "difficult" but that the economy had "bottomed," magic words for investors hunting for the right moment to jump in while stock prices are cheap. The comments in the report are not an official declaration of an end to the downturn, which began in late 2000; most private economists and the Bank of Japan have also stopped short of saying definitively that the tide has turned. But the government's view echoes their guardedly positive forecasts. Exhibit A is the recent growth in Japanese exports to the United States and Asia, which the government says is pushing up output and driving down inventories. But many analysts are skeptical that the upturn in exports will spread to other parts of the economy. Capital spending is still weakening, they say, and consumer spending remains pinned down by falling wages and employment. Many economists expect more contraction later this year after a bit of growth in the first-quarter gross domestic product report, due June 6. Because of the country's huge debt, Japanese lawmakers are being pressed not to stimulate the economy with more government spending, as they have done repeatedly since 1992. Moody's Investors Service has said it is considering another downgrade of the country's credit rating this month, potentially ranking it on a par with Botswana. Prime Minister Junichiro Koizumi has staked his job on reining in the country's runaway debt, which now exceeds gross domestic product by 40 percent. Unusually in Japan, he promised a specific ceiling of 30 trillion yen ($234 billion) a year on new bond issues. Now, with his popularity waning, Mr. Koizumi must defend that cap or risk the fate of Ryutaro Hashimoto, a predecessor whose government fell apart in 1998 when the ruling Liberal Democratic Party forced him to break a belt-tightening pledge and spend more to fend off recession. "Calling an end to the recession gives Koizumi and the Finance Ministry some leverage over the pork barrel politicians in the L.D.P.," said Ryo Hino, an economist at J. P. Morgan Securities in Tokyo. In Japan, when there are deep differences over fundamental policy questions, the result is often a set of watered-down goals with vague deadlines or promises to study the issue further, allowing all sides to claim victory without accomplishing anything. "Policy inertia is deeply rooted in Japan, and signs of life in the economy are an excuse to do nothing for another six months," said Andrew Shipley, chief economist at West LB Securities in Tokyo. "But the fact remains, the economy is not out of the woods yet, as much as the government would like to trumpet it." nytimes.com