Japan’s economic deterioration has slightly eased, mainly due to increased public works spending, but a self-sustained recovery of the private sector has yet to develop, Bank of Japan Gov. Masaru Hayami said Thursday.
Citing the central bank’s monthly report of recent economic and financial developments for December, released the same day, Hayami told a news conference, “the economic deterioration in Japan has moderated somewhat, mainly due to the increase in public investment.”
The December report omits a phrase the central bank has been using in the past several reports describing Japan’s economic conditions as continuing to deteriorate.
The BOJ, however, left its assessments of corporate plant and equipment investment and personal spending — the two main driving forces behind the economy — roughly unchanged, the report shows. “The government’s economic stimulus measures, as well as a revision in the nation’s tax system, are expected to increase demand and support the economy toward the first half of fiscal 1999,” Hayami said. “Nevertheless, an immediate self-sustained recovery in private-sector demand is likely to take some time.”
Although Hayami expressed confidence that firms’ fundraising difficulties will ease toward the yearend due to government and BOJ efforts to improve corporate financing, he remained cautious about economic prospects. “Private demand and corporate equipment investment are unlikely to rise, while consumer spending and corporate income may further decline,” Hayami said. “The minds of companies and consumers remain cautious.”
Hayami, however, gave a somewhat brighter assessment in regard to production, saying its decline has been slowing due to progress in final demand and inventory adjustments.
On the government’s decision to nationalize troubled Nippon Credit Bank, Hayami said, “Necessary measures must be taken for a bank that has fallen into a state of capital deficit and has no realistic plans to solve its problems.”
He declined to be more specific on whether the government’s relatively quick action on NCB signals a possible change in attitude toward reorganizing the banking sector.
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