Economic Expansion to Continue in Japan in 1989, Agency Predicts

Japan’s economy, which has already been expanding for 25 months, will continue to grow in 1989, the Economic Planning Agency predicted Monday.

In its 1988 report on Japan’s economy, the agency said domestic demand continued to spur growth and help reduce the country’s large trade surplus.

It said there was nothing in sight in the country itself that could retard economic growth, predicting that the economy will maintain “smooth growth, with personal spending and corporate capital investment as the engine.”

However, the agency stressed the need for astute management of fiscal and monetary policies and stepped-up efforts to ease various restrictions, open markets and cut the trade surplus.

The report also said it was necessary for Japan to coordinate policies with other major industrial countries to head off inflation.

The government has set an inflation-adjusted growth goal of 3.8% for fiscal 1988, which ends March 31, but most economists have said an expansion of more than 5% was possible because of the present robust domestic demand.

At present, the agency report noted, corporate capital spending was mainly fueling growth, pushing up production and spurring consumption through creation of more jobs and higher income. This, in turn, was prompting corporations to pour more money into the improvement of production and other facilities.

The agency shrugged off worries among some economists about excessive production, pointing out that much of the equipment investment was going into research and development that does not lead immediately to an increase in production.