Japan: Stop-go economy

Japan's consumers don't fall for the lure in their department stores

After a good start into the year Japan's faltering economy could soon come to a sudden halt again, according to the country's finance minister Kiichi Miyazawa.

Speaking on a television talk show, Mr Miyazawa confirmed expectations of a 2% growth rate for the first quarter of the year.

Kiichi Miyazawa is sceptical about Japan's economic outlook

But he immediately warned that flagging consumer demand could bring the economy to a halt again. The economy "may grow slightly, but it may also show a contraction" during the April-June period, he said.

Future growth, he argued, would depend "on how much private consumption can improve".

Analysts bullish

While Mr Miyazawa tries to dampen expectations, many analysts are more bullish.

Richard Jerram of ING Barings in Tokyo believes that Japan's official statistics are hiding strong growth figures: "The bulk of economic releases are pointing to a robust economic recovery, with an increasing number showing the strongest growth in over a decade".

However, he adds a note of caution as well: "Consumer-related data continue to indicate a stagnation that is at odds with this picture of cyclical recovery."

The official figures for Japan's gross domestic product (GDP) will not be made public before next month.

GDP rollercoaster

If GDP did indeed grow by 2%, it would follow six months of economic contraction.

The country's economy is finding it difficult to emerge from its worst recession since WWII.

During the first half of 1999 the economy showed first signs of growth, following an extended downturn. This trend, however, was soon reversed as consumers were reluctant to part with their money.

Japan's economic planers are worried by the fact that the economy continues to be sluggish despite a government spending programme worth one trillion yen over the past decade.

Interest rates are zero, and the Bank of Japan is not expected to reintroduce them before private consumption goes up again.