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Thursday, 13 June, 2002, 12:42 GMT 13:42 UK
Japan on the mend, central bank says
Japanese traders in the Japanese national football team's colours
The World Cup is giving Japan a welcome burst of confidence
Japan's central bank has given its clearest sign yet that it believes the country is on the way back from a decade of downturn and a 20-month recession.

In its latest analysts of the state of the economy, the Bank of Japan upgraded its forecasts for the fourth straight month.

"Japan's economy shows signs of stabilising with a distinct increase in exports and a pickup in production," it said.

But the bank warned that, despite government statements that the worst was definitively over, weak domestic demand meant the recovery was still at risk.

The bank also pointed to the slowing of the economic turnaround in European and US trading partners.

"The pace of recovery is likely to become somewhat slower in the future... as the effects of overseas restocking dissipate," Thursday's report said.

Growing

Thursday's report showed that exports reached 4,170bn yen ($33.2bn; 22.6bn) in April, 1.3% higher than a year before,

The increase was the first year-on-year rise for 13 months.

Imports fell 3.2% to 3,160bn yen, helping the current account surplus hit 1,090bn yen, 21.7% up on the April 2001 figure.

Observers said the figures reflected the shock burst of growth Japan registered in the first three months of the year.

Ministry of Finance figures indicated that the economy expanded by 1.4% over the quarter, a rate which - if continued for a full year - would amount to 5.7% growth.

But with growth focused around in exports, and doubts over whether it is feeding through to small business, services and households, holding onto that pace of expansion is widely seen as unlikely.

Steeling itself

One risk to exports comes with the US tariffs on steel introduced earlier this year.

Japan has been mulling how to strike back.

But while the European Union has now approved a list of retaliatory sanctions, Japan has decided to put them off indefinitely, in the hope that the US will be persuaded to grant exemptions.

An hour-long conversation between US trade representative Robert Zoellick and Takeo Hiranuma, Japan's economy, trade and industry minister, produced assurances that the US was prepared to be "constructive" about exemptions.


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