Japan's economy will decline 0.3 percent in 1998 -- its first minus growth in 24 years, the Organization for Economic Cooperation and Development said April 8.
The latest forecast is in stark contrast with the previous projection of 1.7 percent growth. "In Japan, the already poor economic situation, as well as the existing weakness of the financial system, have been aggravated by the Asian crisis," the OECD said in its economic outlook.
The Japanese government introduced an economic stimulus package last December, but "its effect will be limited in stimulating the economy because of the announced temporary nature of the personal income tax cuts," the organization said in the report.
Without additional stimulus measures, Japan will register a decline in output this year and growth of only 1.3 percent in 1999, the OECD said. Last December, the organization forecast 1.7 percent growth for Japan in 1998 and 2.1 percent in 1999.
But the prolonged economic slump here changed all that, and the weakness in the economies of Japan and South Korea will have a negative impact on the overall outlook for the organization's member countries, especially in Asia.
The overall growth of OECD countries will be 2.4 percent in 1998, down 0.5 percent from the previous projection, and 2.5 percent in 1999, down 0.1 percent, the organization said. "Most of the downward revision to the projections for activity is accounted for by a markedly weaker picture for Japan and (South) Korea," it said in the report.
"In most OECD countries outside Asia, the underlying economic situation is generally more positive than expected earlier," it says.