Japanese output falls again, but government insists 'this is not a recession'

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The Independent Online

The Japanese economy toppled back into recession at the end of last year, with official figures yesterday showing output fell for the second successive quarter in October-December. It was also the seventh quarter of declining GDP in the past nine.

The Japanese economy toppled back into recession at the end of last year, with official figures yesterday showing output fell for the second successive quarter in October-December. It was also the seventh quarter of declining GDP in the past nine.

Share prices in Tokyo plunged nearly 3 per cent. The Nikkei index ended nearly 561 points lower at 19,189.93, with some of the biggest falls affecting technology stocks like Softbank and Sony.

The government insisted Japan was still on the verge of recovery. "I do not consider this a recession," said Taichi Sakaiya, the Economic Planning minister. "New areas of growth such as information technology will pull the economy forward." He said the Economic Planning Agency was likely to upgrade its growth forecast in this month's economic bulletin. Analysts were inclined to give the government the benefit of the doubt, not least because there are grave concerns about the quality of the official figures.

However, the 1.4 per cent decline in GDP in the fourth quarter of last year was bigger than expected. The GDP deflator, a measure of the overall price level in the economy, was 1.5 per cent lower than a year earlier.

Growth for 1999 as a whole was .3 per cent, with falling output in the second half almost offsetting the growth of the first six months. Business spending remained buoyant in the final quarter, with investment up 4.6 per cent and a big increase in inventories. Household spending fell 1.6 per cent, expenditure on housing plunged 5.8 per cent, and both public expenditure and net trade dragged output lower. Sharp cuts in winter bonuses and continuing job insecurity helped explain the belt-tightening.

The weak growth at the tail end of 1999 was a reflection of corporate restructuring, economists said. "It really is the corporate recovery that is driving the Japanese economy. Consumption as a whole is going to be lagging behind," said Jesper Koll, chief economist at Merrill Lynch in Tokyo.

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