The Japan government said yesterday it expected economic growth to flag later this year, partly because of soaring oil prices, underscoring the need for one last burst of stimulus spending.
Japan’s gross domestic product (GDP) rose 1.0 per cent in the three months to June from the previous quarter, when it had expanded by a robust 2.5 per cent. But this healthy pace was unlikely to be sustained, Economic Planning Agency (EPA) director-general Taichi Sakaiya said. He had “the perception that GDP will be negative in the October-December quarter as it cannot continue the rapid growth seen in the last two quarters,” Sakaiya said.
“How the recent rise in crude oil prices will affect the trend in the US and Asian economies needs to be monitored closely, while the situation in Japan resembles that prior to the first oil-shock crisis” in the early 1970s. Japan, which is heavily reliant on outside sources for energy, saw its current account surplus slump 17.6 per cent year-on-year in July, the finance ministry said yesterday.
Sakaiya said the government would work to ensure its GDP growth target of 1.0 per cent for the full financial year to next March. “We need to make one or two more pushes” to get the world’s second-biggest economy back on track, he said.
“To achieve this goal, we cannot allow the economy to be in a bad shape in the January-March quarter and in the April-June quarter,” he said. “We should also remember policy mismanagement in 1998 that resulted in the resumption of the recession.”
Under former prime minister Ryutaro Hashimoto, the government two years ago raised the sales tax from three percent to five percent in a bid to mend state finances. But the tax hike served only to depress consumer spending and extend Japan’s economic slump, economists say.
Despite being concerned about ballooning state debt, the government is planning to introduce another supplementary budget around November to give the economy a final kick-start. The package will be worth around five trillion yen ($47 billion), economists estimate.
Sakaiya said the economy was undergoing changes led by information-technology which would be of lasting benefit. – AFP
(c) – Agence France Presse.
