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Last Updated: Friday, 21 November, 2003, 11:09 GMT
Japan's revival gathers strength
The economy is showing signs of recovery
Japan's fragile economic recovery is gathering pace, as trade and industrial activity proved stronger than experts had expected.

The numbers seem to confirm signs that the country is at long last climbing out of the doldrums after repeated recessions over the past decade.

But optimism was tempered by worries about the strength of the yen, which threatens the health of exporters.

Recent terror attacks, and threats against Japan, are causing concern too.

Markets around the world, including Japan, have suffered from the shock of the suicide bombs which killed dozens of people in Istanbul and Iraq over the past 24 hours.

The benchmark Nikkei 225 index dropped below the key 10,000 level earlier this week after an alleged al-Qaeda threat directed at Japan, as well as the US and three of its other allies.

Dollar worries

The market jitters were downplayed by the Bank of Japan(BoJ), which was criticised for not acting to calm nerves.

"Stocks are the most unstable element, but we do not see them posing an immediate threat to the economy going forward," said BoJ Governor Toshihiko Fukui.

Of more immediate concern, many economists believe, is the yen, which broke above 107 yen to the dollar on Thursday before the Bank of Japan intervened to push the currency back down again.

The dollar's weakness is being exacerbated by worries about the US's massive current account deficit, amid signs that foreign countries - particularly Japan and China - are becoming more reluctant to buy US assets and thus underwrite America's debts.

Good numbers

Still, the data is reinforcing impressions that Japan is on the mend.

Recent figures suggest an annual economic growth rate of above 2%, with signs of a recovery for domestic spending by both households and companies.

The Ministry of Economy, Trade and Industry's industrial activity index was up 2.2% in September from the month before - twice as great an increase as had been predicted and the fourth gain in five months.

And the Bank of Japan upgraded its own outlook for Japan's economy for the third month in succession.

All of this is good news for newly re-elected Prime Minister Junichiro Koizumi, who was returned to power earlier this month with a reduced majority - put down by some commentators to the slow pace of economic reform and recovery.

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