18 January 2001, 10:13  BRIDGE INTERVIEW: Japan CEFP's Yoshikawa: "Yellow" signals...

By Shigeo Kodama, BridgeNews
Tokyo--Jan. 18--Hiroshi Yoshikawa, member of the newly created Council of Economic and Fiscal Policy (CEFP), said Wednesday he cannot clearly say the economy is in a strong self-sustainable recovery phase now due to some yellow warning signals. Yoshikawa also said he is against the price-keeping-operation (PKO) type stock steps.
* * * Yoshikawa, one of 11 CEFP members, spoke on the current economic conditions, review of the fiscal system and measures to boost stock prices in an interview with the BridgeNews. CEFP was set up on Jan. 6 as a body to decide on economic policies and basic stance in compiling budgets in the Cabinet Office.
--ECONOMIC CONDITIONS
Yoshikawa said the economy is now in a recovery trend, but he added, "There are yellow signals which prevent (us) from clearly saying the economy is in a strong self-sustainable recovery phase now."
He cited the following 4 factors as yellow signals: --Personal consumption, which accounts for 60% of Japan's gross domestic product, still lacks strength.
--Capital investment, which has led the economy so far, may show "yellow signals." He said a major gap was seen in recovery speed between manufacturers and non-manufacturers. The Ministry of Finance said capital investment by manufacturers rose 13.0% on year in July-September, while that by non-manufacturers fell by 5.9%.
--Stock prices remain at low levels.
--The possible slowing of the U.S. economy is expected to have a negative impact on exports in 2001.
Yoshikawa added the government scenario of an economic recovery accelerating in fiscal year 2001-2002 (April-March), compared with FY2000, "will not be totally impossible," but it is necessary to pay attention to some factors mentioned above.
The government now sees the FY2001 real GDP growing 1.7% on year, accelerating from an expected 1.2% rise in FY2000.
Meanwhile, he said the current U.S. dollar levels against the yen is positive for the Japan economy, given the current uncertain conditions. The U.S. dollar is traded above 119 yen today.
CEFP will have the second meeting from 1645 JT today. Minister of State for Economic and Fiscal Policy Fukushiro Nukaga plans to meet the press after the meeting.
--FISCAL REFORM
Yoshikawa said fiscal steps are still effective in stimulating the economy, while some others said the impact of fiscal measures with public works projects is waning, criticizing Japan as the only nation which aggressively promotes fiscal measures as a step to prop up the economy among industrialized nations.
But Yoshikawa seeks review of the contents of the ongoing fiscal steps, including review of public works projects, is needed from this year, adding that if the government continues public works projects, they should be limited to projects which are effective in boosting investment by private sector.
Traditional-type public works projects are seen effective in boosting overall demand by expanding public demand, but it is not necessarily so in stimulating private demand.
Meanwhile, he said it is necessary to pay attention to the economic conditions when the government decides on the pace of reduction in fiscal deficit. MOF said outstanding debt of the central and regional governments will total 666 trillion yen at the end of the FY2001.
--STEPS TO BOOST STOCK PRICES
Yoshikawa said he is "very negative" on PKO-type stock boosting measures which involves the buying of stocks with public funds. Also, he does not think some stock price boosting steps, which are now being discussed (in the government and coalition parties) are necessarily substantial ones.
Substantial steps to boost the stock prices are measures to strengthen Japan's economy, he said.
The stock measures discussed now include the lifting of limits on companies in buying and holding their own shares.
A special panel for activating the stock market in the coalition Liberal Democratic Party plans to hold the first meeting today. End
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