To: Zeev Hed who wrote (136 ) 9/8/1998 2:39:00 PM From: SOROS Respond to of 1151
CNNfn - 09/08/98 TOKYO (Reuters) - Japan, marking the end of its third year of record low interest rates, said on Tuesday its economy had slipped further into a rut amid turmoil in global financial markets. "Japan is not in a deflationary spiral, but is near the entrance. There is a danger of being sucked into one, and the main reason for that is the international environment," Economic Planning Agency (EPA) Minister Taichi Sakaiya said. He told a regular news conference the main factor driving Japan to the edge of a deflationary spiral was economic and political confusion in Russia and Asia, which was spreading to other economies such as those of Latin America. "Should the international environment worsen beyond expectations, Japan must be on the lookout. It would need to take more drastic steps," Sakaiya said. The government's monthly economic report, issued by the EPA on Tuesday, showed recent falls in Tokyo share prices and sliding long-term interest rates were deepening the gloom surrounding an economy mired in a prolonged slump. The EPA report maintained its overall assessment that the economy was in a "prolonged slump," but changed the wording to describe conditions as "extremely severe" instead of "exceedingly severe." "We revised our assessment slightly downwards by changing the expression to show an increase in severity," Takashi Omori, national economic division director of the EPA's Research Bureau, told reporters. The EPA report did not take into account this week's dramatic rebound in Japanese shares and the yen. Tokyo stocks ended Tuesday morning trade up 2.32 percent at 15,132.72 -- the first time the key indicator had regained the 15,000 point level since August 26. The dollar, which traded at over 147 yen in mid-August, was at 131.99/04 at Tuesday midday. Despite a drastic step taken three years ago on Tuesday to cut its official discount rate to a record low 0.5 percent -- where it has stayed ever since - Japan has failed to attain a strong economic recovery. Concerted action Speculation even emerged last week that the Bank of Japan might be forced to further ease the rate in a concerted action with the United States to help the global economy. But Finance Minister Kiichi Miyazawa denied such discussions took place during his meetings with U.S. Fed Chairman Alan Greenspan and U.S. Treasury Secretary Robert Rubin in San Francisco on Friday. "There was no such discussion and there was no atmosphere like that either," Miyazawa told a regular news conference. Rubin urged Japan, as the world's second-biggest economy after the United States, to do more to deal with a global crisis that had begun affecting Wall Street, Miyazawa said. "He wanted us to do something more, quickly. But when I asked what, he was not specific," Miyazawa said, repeating that the United States did not want to "carry the baggage of the world alone." The EPA's economic report provided no new ideas on what should be done for the economy, merely repeating that the government would quickly carry out economic stimulus measures through smooth implementation of extra and full state budgets, along with over six trillion yen ($45.4 billion) in tax cuts. "It is uncertain whether these measures will be sufficient to lift the economy, but they will surely support it," Sakaiya said.