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The economy shrank by an annualized 5.3 percent during the last three months of fiscal 1997 compared with the previous quarter, leading to the nation’s first annual economic contraction in 23 years, according to figures released Friday.

The Economic Planning Agency calculated that annual growth in gross domestic product for fiscal 1997 to March 31 came to negative 0.7 percent, lower than the negative 0.5 percent logged in fiscal 1974 in what was previously the worst figure in the postwar era.

It was also the first time the economy shrank on a quarter-to-quarter basis for two straight quarters since the period spanning October 1994 through March 1995.

EPA Vice Minister Shimpei Nukaya told a news conference that while he had expected the growth figures to be bleak, Friday’s results show the impact the Asian economic turmoil and weak domestic financial sector are having on the economy more candidly than was expected. “Much of the impact came from the fall in private-sector investment and exports, which have been propping up the economy so far, and this can be attributed to the (lack of) corporate confidence,” he observed.

Real GDP — the total amount of goods and services produced in the country — stood at 479.84 trillion yen in fiscal 1997. Nukaya said, however, that he hopes economic recovery will become more concrete after the government’s 16 trillion yen economic pump-priming package is implemented.

He added the government would still stick to its target of securing 1.9 percent growth in fiscal 1998. To achieve this, quarter-on-quarter growth of 1.2 percent would be needed for each three-month period up to March 1999.

Most private think-tanks agree that the record-scale stimulus, which includes special income tax cuts and extra public works spending, will support the economy in the latter half of the current fiscal year, but only to the point of boosting the growth rate for fiscal 1998 to about 1 percent at best.

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