Report Underlines Risk of Japan Recession

[Yoshie Furuhashi <furuhashi.1@xxxxxxx>]

New York Times February 28, 2001

Report Underlines Risk of Japan Recession

By REUTERS

TOKYO, Wednesday, Feb. 28 - Japan's industrial production slumped a
surprising 3.9 percent in January, the government said today,
providing more evidence of a sharp economic slowdown and helping to
send the Tokyo stock market to a 15-year low.

The Nikkei 225 average fell 2.11 percent in the early afternoon to
12,784.17, its lowest since Dec. 10, 1985, as investors shortened the
odds of a return to recession after a decade of slow, on-and-off
growth.

"It's a very bleak number," said Garry Evans, a strategist with HSBC
Securities.  "The risk of Japan going back into outright recession is
a very real risk."

Just as troubling as the drop in industrial production was a 0.6
percent increase in inventories, following a 0.1 percent drop in
December, suggesting that manufacturers will have to cut output
further to work off stockpiles of unsold goods.

The weakness fanned speculation that the Bank of Japan, whose
policy-making board was meeting today, might be jolted to emulate the
United States Federal Reserve and try to help the economy by easing
credit further.

Even before today's report, Japan was flirting with recession,
commonly defined as two consecutive quarters of shrinking production.

Gross domestic product dropped 0.6 percent in the July-September
quarter, and figures for the final three months of 2000, due next
month, are expected to show modest growth at best.