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Saturday, 27 January, 2001, 18:04 GMT
Mori talks up Japan recovery
Yoshiro Mori
Yoshiro Mori: IT the engine for growth
By BBC News Online's Orla Ryan

Japanese prime minister Yoshiro Mori has sought to paint an upbeat picture of his country's economy at the World Economic Forum in Davos.

It is the first visit by a Japanese premier to the summit and his presence reinforces that of his ministerial team, which has been using the conference to voice its belief that the Japanese economy is at a crossroads.

In his speech, Mr Mori stressed that information technology was the engine which would power Japan's recovery.

Swiss policeman with a sub-machine gun
Swiss security forces on alert for protesters
Mixed economic signals have made it hard to determine whether the Japanese recovery is really underway, while many international observers have criticised the slow pace of structural reform.

Mr Mori made it clear that he is determined to preside over the "rebirth of Japan" and that the economy is undergoing changes far and above those perceived by people outside of Japan.

But, the confident picture painted by Japan was also punctured by earlier comments from the International Monetary Fund's Stanley Fischer. He warned that the Fund would cut its forecast for world growth from 4.2% to 3.5%.

He added that it would be more difficult for Japan to spur growth through monetary or fiscal policy than Europe or the US.

Short of full recovery

The tone of Mori's speech was conciliatory, recognising that the last decade of the 20the century had effectively been a "lost decade".

Japan's economy is still struggling to recover from the bursting of the asset price bubble in the early 1990s.

Many high profile companies have gone bankrupt, including Sogo, one of the countries' largest retailers.

Consumer confidence remains moribund, with people still reluctant to part with their cash.

The country's debt burden has also ballooned, as the government has unveiled numerous fiscal packages in a bid to boost public spending.

"We must work to consolidate government finances, especially the pension system," Mori admitted.

"The changes taking place in Japan... may have been difficult for outsiders to comprehend," he added.

Growth boost?

Once Japanese companies have adjusted their balance sheets to cover new accountancy rules later this year, growth should pick up, he said.

The government's official forecast for economic growth for the fiscal year beginning in April 2001 is 1.7%.

"In the fiscal year of 2001, it is expected that economic growth will rise to just a point short of a full recovery," he said.

He pointed out that per capita GDP is 13% higher than it was at the height of the asset price crash in the mid 1990s.

IT engine

Again he stressed the importance of IT as an engine for economic growth.

"We are making steady progress in adjusting the balance sheet, raising the growth rate...vigorously promoting the IT revolution as a core element," he said.

But it is arguable whether IT can pull the Japanese economy through.

Having come late to previous technology revolutions, Japan now sees the mobile internet as one way to regain economic stature.

The Japanese have enthusiastically adopted the mobile internet.

About half of the Japanese population use mobile phones while 15% access the internet via a mobile phone.

The success of I-Mode, the mobile internet product offered by Japanese giant NTT DoCoMo, have made Japan a leader in this type of technology.

AOL Japan signed a deal with NTT DoCoMo last year, in part to gain acces to the I-Mode technology and also in part to gain access to the Japanese market, one dominated by telecoms giant NTT.

The government is banking on IPv6, a new internet protocol, that will expand the limits of the internet.

Europe with economic growth of about 3% will be positive for the world economy

German finance minister

Powering the world

Part of the challenge for the Japanese economy is supporting the world economy as its US counterpart slows.

While Mori may attempt to pitch Japan as the engine which will help fire the world economy, observers remain sceptical.

Attention has also focused on the role Europe could play in helping the world economy chug along

German Finance Minister Hans Eichel said Europe would be able to support world economic growth by growing 3% in 2001.

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25 Jan 01 | Business
Tight security for Davos summit
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