JAPAN OFFICIALS SAY WORST MAY BE OVER FOR ECONOMY
Government officials said the worst may be
over for the Japanese economy, after today's news of stronger
than expected growth in the January/March period.
    But private economists were not so sure and said the
economy was unlikely to achieve the government's 3.5 pct growth
forecast in the current fiscal year ending next March.
    As already reported, GNP rose 1.2 pct in the January/March
quarter, after a revised 0.7 pct increase in the previous three
months. For the fiscal year that ended last March 31, GNP
growth slowed to 2.6 pct from 4.3 pct in 1985/86.
    The government economists acknowledged that the improved
export performance in the January/March quarter was unlikely to
be repeated. The volume of exports during the period was up two
pct from the previous three months.
    The yen's rise in April to about 140 to the dollar from 150
probably resulted in a fall in exports in the April/June
quarter, they said.
    However, given the yen's recent stability, stepped-up
domestic demand should work as a driving force to push the
economy onto a path of sustainable growth, they said.
    Many private economists, though, doubt that the economy
will achieve the government's 3.5 pct growth forecast for the
1987/88 year.
    Growth in 1986/87 also fell short of the government's
forecast, which was revised downwards to three pct last
December from an original four pct.
    Domestic demand as a whole is not strong enough, except for
housing, said Johsen Takahashi, chief economist at Mitsubishi
Research Institute.
    Consumer spending is likely to remain weak as the growth in
nominal income stays low, he added.
     The rise in consumer spending in the January-March quarter
was simply a reflection of the contraction that occurred in the
preceding three months, Takahashi said.
    Private capital spending in the quarter looked strong but
this was primarily because utility companies brought forward
their 1987/88 capital investment plans into the final quarter
of 1986/87 in line with the government's economic stimulation
package announced last fall, he said.
    Dai-Ichi Kangyo Bank chief economist Kosaku Furuta said he
was unable to say the economy has bottomed out, but added he
expects increasing signs of recovery in the coming months.
    Destocking is coming to an end and companies are starting
to rebuild inventories, Furuta said.
    Housing is expected to remain buoyant, backed up by lower
interest rates as well as government policies to stimulate the
sector, he said. The government's recently unveiled 6,000
billion yen economic package will also help the economy.
    But he said that the economy was unlikely to achieve the
government's 3.5 pct forecast for 1987/88, although growth
might come close to three pct.
 REUTER
