3 Indicators Show Japanese Economy in Sharp Slump : Business: In the 2nd quarter, GNP inched up 0.3%, personal spending was flat, and vehicle production suffered its sharpest decline since 1974.
A trio of major economic indicators in Japan on Tuesday underscored the serious troubles of the nation’s economy. The nation’s gross national product increased by a meager 0.3% in the second quarter, while household spending was flat and vehicle production suffered its steepest decline since 1974.
Takeshi Noda, director general of the Economy Planning Agency, attempted to put a good face on the barrage of grim news, suggesting that the low GNP figure represented a bottom and predicting a bounce beginning as early as next month.
Private economists remained skeptical.
“It’s difficult to see where Noda gets his optimism,” said Jesper Koll, chief economist at S.G. Warburg Securities. With recent statistics showing business optimism, capital investment and consumer demand at record lows, Koll said an economic rebound is unlikely anytime soon.
That the GNP showed any increase at all last quarter was largely because of two factors--strong exports and a dramatic 32.6% quarterly rise in public works investment. But without a strong showing soon from Japanese businesses and consumers, most economists remain doubtful in the short run.
The GNP figures gave the overall picture. The other indicators gave the explanation. Auto makers said production declined in August faster than it has in any month since August, 1974, and the government reported there was no growth in consumer spending in July.
As the economy gets weaker, companies produce less and consumers shy away from making major purchases. This creates a downward spiral of less spending, leading to less production, leading to less spending.
Japan’s economic planners hope to break the spiral with an infusion of about $86 billion in government spending.
Economists question whether this short-term solution is advisable. The new government spending could put companies back in a growth mode before they have reduced the debt and inventory they built up.
The government, under political pressure to get the economy going, is pushing ahead with the plan and hopes to reach its target GNP growth of 3.5% for the business year to March. To reach that goal, Japan’s economy will have to grow by the unlikely rate of 1.51% in the next three quarters.
“This is an impossible task,” said Mineko Sasaki-Smith, an economist at CS First Boston.
“You’re not going to see a sustainable pickup in growth until the next fiscal year,” said Michael Hartnett, an economist at Schroder Securities. The next quarterly figures will probably show year-on-year growth of less than 1%, Hartnett said.
The Economic Planning Agency said Japan’s GNP, the total output of goods and services, rose by only 0.3% in the April-to-June quarter from the first quarter. Year-on-year growth was 1.6%, the lowest year-on-year increase since the first quarter of 1975, when the Japanese economy contracted by 1% in the wake of the oil shock.
