June 11 (Bloomberg) -- Japan's economic growth slowed in the first quarter as companies restrained investment and exports fell, putting pressure on Prime Minister Junichiro Koizumi's government to sustain a recovery from the third recession since 1991. Gross domestic product rose 0.1 percent, seasonally adjusted, from the fourth quarter, better than a May 16 estimate of zero growth. The economy grew a revised 0.4 percent in the fourth quarter, the Cabinet Office said in Tokyo. ``The Japanese government needs to revive the economy,'' Nissan Motor Co. Vice Chairman Takeshi Isayama said in an interview yesterday. ``There needs to be a sense of urgency.''
Business groups have called on Koizumi to speed spending and cut corporate taxes to boost the world's second-largest economy. The yen's 5.9 percent rise against the dollar in the past year and the spread of SARS in Asia are hurting exports by companies such as Kyocera Corp., which delayed introducing a new cell phone model in China because of the deadly virus. The No. 250 bond, which carries a 0.5 percent coupon and matures in 2013, rose 0.240 to 100.622 at 12:52 p.m. in Tokyo. Its yield fell 2.5 basis points to 0.435 percent after earlier falling to a record 0.430 percent. A basis point is 0.01 percentage point. Japan is part of a global slowdown. The U.S. economy, the world's largest, grew at a 1.9 percent annual pace in the first quarter -- less than the 3 percent rate economists say is needed to cut unemployment. Germany's economy, the third-largest, shrank 0.2 percent in the first quarter from the previous period.
Exports Fall
Japanese exports fell 0.4 percent in the first quarter, less than the 0.5 percent decline estimated in the government's May 16 report, as the prospect of war in Iraq hurt global demand. Business spending rose 0.7 percent in the first quarter, less than the initial estimate of a 1.9 percent gain. Overseas sales are falling further as the spread of severe acute respiratory syndrome dents growth in China and other Asian markets, which buy two-fifths of Japan's exports. Overseas sales fell 1 percent in April, another government report said today, reducing Japan's current account surplus. In May, Kyocera President Yasuo Nishiguchi told analysts that the company decided to postpone the introduction of a new cell phone model in China for a month from its initial June 2 debut because SARS had forced delivery agents in the country to close their shops and cancel shows displaying the new models.
`Mini-Recession'
There are other signs the economy is faltering this quarter. Industrial production fell 1.2 percent in April as orders for semiconductor machinery and digital cameras slumped. Sales at Japanese retailers dropped for a second month in April, a sign of weakness in consumer demand, which accounts for more than half the economy. ``The economy is deteriorating in the second quarter, and growth will probably slow to a zero or a contraction,'' said Tomoko Fujii, a senior economist at Nikko Citigroup Ltd. ``The Japanese economy has already entered the phase of a mini- recession.'' Finance Minister Masajuro Shiokawa may order the central bank to sell Japan's currency as a way of stemming the yen's gains, which have made the nation's goods more expensive in foreign markets, hurting exporters such as Sony Corp. and Honda Motor Co. The central bank sold a record 3.98 trillion yen in May. The yen was at 118.07 at 12:51 p.m. in Tokyo, compared with 117.79 late yesterday in New York.
BOJ Meeting
Koizumi may have trouble resisting pressure to increase spending on roads, bridges and other public works to fight unemployment, which held at 5.4 percent April, matching a record. Koizumi last year was forced to break a pledge to limit new bond sales to curb the national debt, which is the highest in the industrialized world at 140 percent of gross domestic product. Politicians in Koizumi's Liberal Democratic Party have also pressed Bank of Japan Governor Toshihiko Fukui to end five years of falling prices through purchases of bank shares, real-estate investment trusts and exchange-traded funds. Fukui has resisted such calls, saying it's not the central bank's job to lift asset prices. The central bank is running out of policy options after cutting interest rates almost to zero in March 2001 and flooding money markets with trillions of yen. Central bank policymakers, who end a two-day meeting today, will probably announce details of a plan to buy asset-backed securities as a way of channeling money to companies, economists said.//www.bloomberg.com