By a staff reporter
THE world's second biggest economy and Asia's giant is still in a sickly state, according to key reports issued in Tokyo.
Japanese government agencies suggested that the bottom of the recession had finally been reached, but outside economists said that there were still factors that could drag Japan down again _ and with it the rest of Asia.
The Bank of Japan and the Economic Planning Agency (EPA) both reported that the combination of heavy spending of hundreds of billions of US dollars on public works and the reduction of interest rates to near-zero had managed to prop up the economy. But they were not prepared to predict yet that they could see the recovery.
Politicians tried to put a brave face on the reports. ``The pent-up demand is awakening,'' said Prime Minister Keizo Obuchi, but he then admitted: ``Of course, employment conditions and capital investment continue to be severe.''
The tortured prose of the EPA showed a lack of confidence: ``Although the economy continues to be in an exceedingly severe condition as private demand is weak, it is gradually bottoming out of the downtrend, supported by a series of policy initiatives.''
The Bank of Japan's assessment was more straightforward. ``Japan's economy, at present, appears to have stopped deteriorating,'' said the central bank in its monthly report. But it warned: ``Corporate profits remain weak and employment and household income conditions continue to deteriorate.''
Sceptical economists are not convinced that the corner has yet been turned. Reuters asked 36 economists for their predictions for the financial year that started this month, and got an average forecast of a further fall of 0.7 per cent in growth _ much more pessimistic than the positive growth of 0.5 per cent that the government has projected.
Individual forecasts ranged from a 3.2 per cent rise to a 2.3 per cent fall, but only two economists predicted growth, five said the economy would remain flat and 29 suggested a further shrinking on top of negative growth for five successive quarters.
The problem is that Japan's economy is trapped in an intricate but ugly web. Although the government has spent massively on public works _ US$300 billion (HK$2,340 billion) last year alone _ these have not had a decisive impact.
In particular, consumer confidence remains low. On the streets of Tokyo, the people look as well-fed and well-dressed as ever, but the free-spending by government has not inspired them to part with their money. Indeed, poor growth has made them more uncertain.
By the autumn the effects of the spending packages will have worn off.
Politicians are resisting calls for a fresh package. Finance Minister Kiichi Miyazawa this week repeated his assertion that there was no need for a new stimulus.
Unemployment has risen to a post-war record 4.6 per cent and is likely to rise higher and thus dampen consumer spending even further, push profits lower, with the risk that Japan will be sucked into a whirlpool of recession.