WASHINGTON – U.S. Federal Reserve Board Chairman Alan Greenspan on Wednesday said Japan’s economy is showing signs of stabilization thanks to recoveries in the U.S. and Europe.
“Japan is beginning to show signs of stabilization as a consequence of the fact that the U.S. and Europe are beginning to firm,” Greenspan said in a testimony before the congressional Joint Economic Committee. “To be sure, there’s been a very serious deflationary problem in Japan, but there are the first inklings that that is beginning to stabilize.”
The Bank of Japan last week upgraded its economic assessment for the second successive month, saying the pace of deterioration is moderating.
“Japan’s economy still continues to deteriorate as a whole, but the pace has moderated somewhat,” the Japanese central bank said in its April report on economic and financial developments.
‘Decisive action’ call
WASHINGTON (Kyodo) Japan needs “decisive action” to fix its economic problems, even though the economy is showing signs of bottoming out, International Monetary Fund chief Horst Koehler said Wednesday.
“There is now hope that the recession is bottoming out. But the return to a growth performance that corresponds to Japan’s size and potential demands decisive action for the disposal of nonperforming loans, industrial deregulation and restructuring of its banking and corporate sector,” Koehler said in a speech in Washington.
He said Japan’s economic situation remains a matter of “serious concern” and called for an early economic recovery in Japan.
“Japan’s ongoing recession is still a drag on global growth, in particular on activity in the Asian region,” Koehler said.
The IMF chief also said he is concerned about a delay in Japan’s economic reform efforts.
Compared with the United States and Europe, Japan may take a longer time to accomplish reforms, because it is very difficult for the Japanese economy to handle changes, he said.
Koehler delivered the speech ahead of Saturday’s meeting of the IMF’s policy-guiding International Monetary and Financial Committee.
Koehler was upbeat on the global economic outlook. “A recovery is under way now in the United States and this is already beginning to have a positive impact on the economies in other regions,” he said.
The future course of the global economy depends on the strength and durability of the U.S. economic recovery, he said.
However, Koehler cited uncertain corporate earnings prospects, volatile oil prices and political uncertainties, including the situation in the Middle East, as possible destabilizing factors.
To ensure a robust recovery, the U.S. should pay special attention to preventing the re-emergence of the fiscal and trade deficits of the 1980s and to increasing the national savings rate, the IMF chief said.
He also asked European countries to move to a higher potential growth path with stronger domestic demand.
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