By Stephen Cannon, BridgeNews
Tokyo--Feb. 8--Japan's economy shrank 0.6% in the July-September period after two quarters of growth, the government said Thursday as dwindling confidence about chances for the world's second largest economy sent shares skidding to a 27-month low.
The gross domestic product data were unexpectedly revised down from a preliminary announcement in December of 0.2% as Japan recorded its first quarter of contraction since October-December of 1999.
The announcement raised concerns that Japan may not meet its target for 1.2% growth for the 2000 financial year, which ends on March 31.
Still, the ever-optimistic Finance Minister Kiichi Miyazawa said the government may still achieve its 1.2% GDP growth goal despite the downward revision in the July-September data.
"Capital investments are at a satisfactory level, but we're still waiting to see when this will lead to a recovery in personal consumption," Miyazawa said summing up the conundrum of Japan's economy.
Indeed, there was a sliver of positive data boosting optimism as the public management ministry said real spending by all households in Japan rose 2.1% from a year before in December, while spending by all households in December rose 1.6% from the previous month.
The ministry also said spending by non-wage earning Japanese households gained 5.5% from the previous year in December. Lawmakers from Prime Minister Yorhiro Mori's dominant Liberal Democratic Party appeared to be clamoring for the central bank to make credit more easily available.
But Bank of Japan Governor Masaru Hayami was having nothing of that. Hayami indicated clearly that he would resist government pressure to implement additional monetary easing at the BOJ's policy board meeting Friday, even as the slowdown in the United States threatens to snuff out Japan's tenuous economic recovery.
"We will maintain our current monetary stance in order to support the economic recovery through monetary policy," Hayami said in response to questions in parliament after the benchmark Nikkei 225 Stock Average broke below 13,000 for the first time since October 1998.
The Nikkei ended down 227.78 points, or 1.7%, at 13,138.23, its lowest level in 15 months after falling below 13,000 for the first time since Oct. 15, 1998.
"Sentiment was dampened," said Hiroshi Sato, general manager of the equity and bond department at Cosmo Securities Co. "Investors became more cautious about slowing earnings after Matsushita Communication Industrial cut its earnings outlook on the heels of Toshiba Corp.
And, "To make matters worse, the GDP data was worse than expected. The market is being hit doubly hard by both the micro- and macroeconomic side," noted Sato. End