Japan's economy will probably have grown more strongly than government forecasts in the business year that ended in March, Economics and Financial Services Minister Heizo Takenaka said on Sunday. But he reiterated authorities will continue to intervene to prevent undesirable sudden moves in foreign exchange rates if they threaten to derail the economic rebound. "The government's scenario calls for about two percent growth in the year," Takenaka said on TV Asahi's Sunday Project discussion programme. "But it will clearly exceed that." When asked if growth could reach three percent, he said this was "possible." In the previous fiscal year, which ended in March 2003, the economy grew 1.6 percent.
Japan's economy is showing real signs of a recovery from a decade of slowness, helped by strong exports to fast-growing neighbour China that are boosting business investment and company profits. The economy grew at its fastest rate in 13 years in the last three months of 2003, and the momentum has carried on into the current year, spreading beyond exporters to smaller companies and consumer spending, the largest part of the economy. The Bank of Japan's closely watched "tankan" corporate sentiment survey last week showed more companies felt better about business conditions than at any time in the last seven years. "Companies' cash is not just going to repaying debts, but is going to investment," Takenaka said. "And it is going into wages, which should boost spending."
YEN A CONCERN
He added that banks were making progress in cleaning up bank loans and returning to health, and noted that foreign investors' appetite for Japanese stocks was proof of the recovery. "Foreign investors are starting to judge the trend (in the recovery) to be firm, not a one-off," he said. However Takenaka reiterated that the yen's strength remained a concern, and repeated the government's view that instability in foreign exchange markets was not desirable.
"Exchange rates are determined by the markets," he said. "We will continue to intervene to prevent sudden movements when there is a danger of that." The Japanese currency reached around 103.50 to the U.S. dollar last week, its highest in four years. But the dollar recovered to around 104.50 on Friday after a bigger-than-expected jump in March U.S. non-farm payrolls data raised optimism over U.S. economic growth. Japan's controversial foreign exchange intervention totalled more than 15 trillion yen ($144.6 billion) in just the first three months of this year, compared with a record 20 trillion yen in all of 2003. Takenaka said that some strength in the yen was unavoidable because foreign investors were buying Japanese assets, increasing demand for the yen. "The issue though is not allowing exchange rate changes to be too sudden," he said.///www..com