Japanese officials remained optimistic about the
future of Japan's economy Monday, despite economic results from
last year showing the country mired in a new recession.
The government revealed Monday that gross domestic product, the
total value of goods and services, fell 1.4 percent in the
October-December quarter due in part to a 1.6 percent drop in
It was the second consecutive quarter of GDP decline, meaning
the economy was officially back in recession after last year's
anemic growth fueled by a massive government spending binge. GDP
shrank 1 percent in the July-September quarter.
However, the grim numbers were not considered a sign that
Japan's economy was headed further downhill, and government
officials were quick to point out hopeful indicators, such as
machine orders and capital expenditure.
"Everyone knows consumption in the January-March period will be
good," Finance Minister Kiichi Miyazawa said. "The fact is, the
economy is clearly improving."
Nevertheless, Monday's numbers were a disappointment.
The GDP decline was much steeper than the 0.9 percent drop
market analysts had predicted. If the economy continued to perform
the same for a year, it would shrink a dramatic 5.5 percent.
The October-December plunge was the third-largest on record,
beat only by the contractions that followed the 1974 oil shock and
the 1997 imposition of a higher consumption tax, the state Economic
Planning Agency said.
At the root of the decline was the usual culprit: The
pessimistic or practical consumer.
With increasing reports of layoffs and cut backs as corporations
restructure to face growing global competition, Japanese have
resisted myriad incentives to spend, including rock-bottom interest
rates and government-issued coupons.
Ron Bevacqua, senior economist for Commerz Securities Co. in
Japan, said that while Japan was "firmly on a recovery trend,"
Monday's announcement showed its economic problems were not over.
"I think that this kind of a report will deflate any kind of
economic overoptimism, which is the kind that we've been seeing,"
The immediate impact of the GDP announcement on markets was
limited, since most players expected some sort of decline. Japan's
benchmark Nikkei stock average lost 560.47 points, or 2.8 percent,
to close Monday at 19,189.93.
The EPA said the Japanese economy now needs to grow 2 percent in
the January-March period for the country to achieve its target of
0.6 percent growth in the fiscal year ending March 31.
EPA chief Taichi Sakaiya said last week that growth in
industrial output and machinery orders since January would probably
help GDP grow 1 percent in the fiscal year ending in March 2001.
He predicted the economy would grow 2 percent in the fiscal year
ending in March 2002, after consumer spending kicked in.
"We are seeing signs of recovery in the Japanese economy faster
than expected," Sakaiya said Monday evening.
Rising industrial production, increasing wages and growing
capital expenditures were fueling a turnaround in the January-March
period, he said.