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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: flickerful who wrote (27502)	9/12/1998 3:53:00 AM
From: flickerful	Respond to of 94695

financial times saturday september 12, 1998 Japanese economy shrinks By Paul Abrahams in Tokyo Japan's economy contracted for the third quarter running in the three months ending in June, its poorest performance since records began in 1955. The worse than expected data, released yesterday, prompted many forecasters to downgrade their predictions for the year, warning that the Japanese economy would contract in the current financial year. Gross domestic product fell 0.8 per cent quarter-on-quarter, an annualised decline of 3.3 per cent. That was against consensus forecasts of minus 0.6 per cent and minus 2.2 per cent. The disappointing data were caused by worse than expected private consumption and capital spending, as well as the failure of much trumpeted government spending programmes, at least so far, to boost the economy. "It has become clear [the government's target of] 1.9 per cent growth is impossible," said Taichi Sakaiya, Economic Planning Agency minister. He declined to give a GDP forecast for the July-September quarter, but said the outlook was "not good". Michael Naldrett, economist at Dresdner Kleinwort Benson, said his company would be cutting forecasts from about 1.5 per cent growth to a contraction of about 1 per cent for the year ending in March 1999. "The question is what the government can do given the collapse in private demand," said Richard Jerram, economist at ING Barings. "The politicians have been so obsessed by the banking bill they have forgotten about the real economy. As for the bureaucrats, they have been so busy trying to boost the yen, they have ignored the fact that a weak currency is good for exports." The dismal data were released after the markets closed in Tokyo. The Nikkei 225 index suffered its largest single day points loss of the year, down 749 points or 5.11 per cent to close at 13,916. The yield on the benchmark 182nd 10-year government bond fell to a new low of 0.78 per cent. "This is utterly unbelievable," said Yasuo Ueki at Nikko Securities. "You could say this means the economy won't get better for 10 years. It means for the time being investors have no other place to go but bonds." Personal consumption fell 0.8 per cent quarter-on-quarter, while capital spending plunged 5.5 per cent. This was particularly disappointing said analysts because these account for more than 70 per cent of GDP. Meanwhile, government capital spending, which should have begun to increase following large stimulus packages, rose just 0.1 per cent. Externals were the only bright spot, although this was due mainly to a 6.8 per cent fall in imports, caused by weak domestic demand. Exports declined 0.4 per cent.