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The BBC's Andrew Walker
"Japan seems set for more short term economic pain"
 real 56k

Faichra McCana West LB Securities in Tokyo
"Japan is now in a recession"
 real 28k

Monday, 11 June, 2001, 07:21 GMT 08:21 UK
Japan slump fears grow
Japan's Prime Minister Junichiro Koizumi
Prime Minister Junichiro Koizumi is struggling with reforms
Figures showing a contraction in Japan's economy for the first three months of this year have raised fears that the world's second biggest economy is on the brink of another recession.


To my regret, this is the actual strength of the Japanese economy at the moment

Heizo Takenada
Economics Minister
A government report shows that the country's gross domestic product (GDP) fell by 0.2% in real terms in the first quarter of 2001 against the previous quarter.

In the financial year to March, Japan's GDP rose by 0.9%, falling well short of the government's goal of 1.2%.

If GDP slips lower again in the next three months, Japan will have technically entered a recession.

Dwindling exports

Japan has been hit by falling exports, largely as a result of the slowdown in the United States.

Japan's exports dropped 3.6% from last quarter's rise of 0.8%.


We might be hitting the runway with no landing gear

Andrew Shipley
West LB Panmure
Companies are also cutting back on investment, while consumer spending remains flat.

Japan was last in recession at the end of 1999 when it showed signs of being strong enough to pull itself out of the cycle of 11 years of negative economic growth.

But since then, the global economic slowdown has sent Japan's economy spiralling back down.

'The recession is here'

The gloomy picture threatens to undermine Prime Minister Junichiro Koizumi's reforms aimed at reining in government debt.

Some analysts believe the latest figures might fuel growing calls for further government spending to nurse the economy back to health.

And Japan may have to undergo painful restructuring if its economy is ever to recover its former vitality.

But tough treatment may do more harm than good, and plunge the economy ever deeper into recession, according to other analysts.

Gloomy outlook

"The recession is here," said Jesper Koll, chief economist at Merrill Lynch.

"This report suggests, if anything, that we might be hitting the runway with no landing gear," said Andrew Shipley, an economist at West LB Panmure.

The release of the figures saw the yen fall against the dollar.

Tokyo's leading share index, the Nikkei, ended the day 204 points lower at 13,226.

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See also:

03 May 01 | Business
Global growth forecast cut by OECD
06 May 01 | Business
US urges Japan to shed bad loans
26 Apr 01 | Business
Japan's new economic team
26 Apr 01 | Business
Japan's economic outlook bleak
25 Apr 01 | Business
Japan cuts growth estimate
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