22 June 2001, 09:58  Takenaka says Japan's economy to remain severe with reforms

By Reiko Mizutome Tokyo, June 22 (BridgeNews) - Japan's minister of state for economic and fiscal policy, Heizo Takenaka, said Friday he sees Japanese economy will remain in a severe condition for the time being, partly because the U.S. economy will unlikely recover sharply in the near future. The severe economic condition in Japan may last for 2-3 years from now on, along with structural reform, including bad loan write-offs, he admitted. Speaking at a regular press conference, Takenaka said, "deflationary pressure caused by (economic) adjustment will continue." He also suggested that Japan may be in a "tunnel" or economic adjustment period in 2-3 years, adding that, the government has to increase citizens' confidence that "Japanese economy is nearing an exit of the tunnel."
Takenaka said the Cabinet Office will release a report in the next week or later about the estimation of the impact from economic reform, mainly bad loan write-offs. The report will include estimation for the number of possible unemployment in each industry, he said.
Takenaka said Thursday that Japan will have to accept low gross domestic product growth at around 0-1% in the coming 2-3 years due to economic adjustment caused by structural reform. He also said GDP will post relatively low growth in the range during fiscal 2001 (April-March).
Asked about policy for bad loan write-offs in the Council on Economic and Fiscal Policy's guideline, Takenaka said Hakuo Yanagisawa, head of the Financial Services Agency, told early this week to put its new scheme of bad loan liquidation in the guideline. Moreover, regarding China's decision to slap duties on Japanese imports in retaliation for Japan's temporary curbs on Chinese agricultural products, Takenaka said, "in general, Japan should consider overall international trade strategy," adding that, although it is important to protect domestic industry, "exports are also important for Japan's economy."

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