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Japan to release economic growth figures next week

TOKYO: Japan's will release economy was likely to grow substantially in January to March and gross domestic product (GDP) could rise by as much as two percent in 2001/02, Economic Planning Agency (EPA) chief Taichi Sakaiya said on Monday. But that bullish outlook was dulled slightly by official figures that showed household spending fell for a fifth straight month, clouding the picture for all-important indicators on private consumption.

Japan's GDP would rise in January-March after it was likely to mark its second consecutive contraction in October-December, a figure that technically puts the struggling economy back into recession, Sakaiya told a parliamentary committee. GDP declined by 1.0 percent in the third quarter of last year.

The government's economic growth target of 0.6 percent for this fiscal year ending in March was achievable, Sakaiya said. He was sounding more upbeat that last month, when he voiced fears that Japan's growth could fall short of even that modest target.

Actual GDP figures for the last quarter of 1999 are to be announced on March 13.

A Reuters' poll of 19 economists last week produced a median forecast of a 1.1 percent drop in the GDP for the quarter, with all expecting the economy to slip into recession. Their forecasts ranged from minus 0.2 percent to minus 1.9 percent.

However, the analysts said the economy was heading toward recovery, albeit gradually. In the first quarter of this year, the economy is expected to rebound with growth of 1.2 percent compared with the previous three months, the survey's median forecast showed.

Sakaiya also sounded a more confident note for the next fiscal year.

"In fiscal year 2000/01 (April/March), Japan's economy will recover to achieve about 1.0 percent GDP growth, mainly supported by private demand."

Growth of about two percent would be possible in fiscal 2001/02, he said.

"Private consumption has shown improvement in January, following a steady rise in industrial production since July," he said, indicating that Japan's worst recession in five decades had bottomed out from December.

However, the Management and Coordination Agency said spending by households fell a real 3.2 percent, or a nominal 4.3 percent, in January from the previous year.

Economists disagreed with Sakaiya, saying private consumption which accounts for 60 percent of gross domestic product might still have further to fall before it begins to recover.

"We can't say that consumption bottomed in December," said Naoki Iizuka, economist at Fuji Research Institute.

Uncertainty about employment amid pressure for corporate restructuring and concerns among the public that the government will have to raise taxes to cope with its ballooning national debt were all putting the brakes on a rise in consumer spending, analysts said.

However, consumption was nearing the point where it could stage a rebound because workers' incomes were expected to improve in the summer, when some companies pay bonuses that will be based on a recovery in corporate profits for last year.-Reuters