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Richard Koo, of the Nomura Research Institute
"The Japanese economy has been in recession for the last ten years"
 real 56k

Friday, 16 March, 2001, 07:43 GMT
Japan admits economy has stalled
Prime Minister Yoshiro Mori
Prime Minister Mori now faces a "pausing" in Japan's economic recovery
Japan's government has acknowledged that its economy has fallen prey to deflationary pressures.

Deflation is defined as a fall in prices, regardless of whether the economy is growing or not.

Declining prices are hurting companies, forcing them to make cutbacks. This in turn could further discourage Japan's weary consumers from spending - an important stimulus for the ailing economy.


Economic recovery appears to be pausing

Japan's Cabinet Office
In a monthly report released on Friday, the government downgraded its assessment of the economy, only days before the Bank of Japan meets on Monday to consider its interest-rate policy.

"Economic recovery appears to be pausing," the Cabinet Office said in the report, which is submitted to Prime Minister Yoshiro Mori.

The term "pausing" was last used in the report in January 1998. Last month the report had said that the pace of recovery had become more "moderate".

Slowdown

The economic blip was attributed to the slowdown in the United States, which has prompted Japanese exports to falter.

In light of the downgrade, analysts are growing increasingly certain that the Bank of Japan will return to a zero interest-rate policy, which was abandoned last year amid controversy.

But despite the admission that the country is suffering from deflation, the government remained adamant that the economy is still heading toward a self-sustaining recovery.

The Cabinet Office cited growth in corporate spending as evidence that the recovery is on route.

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See also:

16 Mar 01 | Business
Tokyo holds onto gains
15 Mar 01 | Business
Bank woes plague Japan
09 Mar 01 | Business
Japan promises share buy-back
07 Mar 01 | Business
Zero interest rates back on agenda
06 Mar 01 | Business
Japan may drop zeros from yen
28 Feb 01 | Business
Japan cuts interest rates
23 Feb 01 | Business
Japan loses blue chip status
16 Feb 01 | Business
Japanese economy fears grow
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