Monday May 25, 09:31 AM
BoJ chief sees 'mild recovery' for Japan
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TOKYO (AFP) - Japan's economy is set for a "mild recovery" and may soon return to positive growth, but the outlook is clouded by considerable uncertainty, Bank of Japan governor Masaaki Shirakawa said Monday.
As Japanese companies reduce their inventory stockpiles, "the negative factors for the economy will recede," he told reporters in Kanazawa, northwest of Tokyo, adding that growth may turn positive in the current quarter to June.
Japan's worst post-war recession is starting to ease, Shirakawa said earlier in the day in a speech to the BoJ's Kanazawa branch.
"The sharp deterioration in economic and financial conditions in Japan and abroad since last autumn is starting to level out and there is a prospect of a mild recovery ahead," he said, according to an official transcript.
But he added: "It is very likely that the severe economic conditions will continue for some time, and the recovery thereafter will inevitably be mild and attended by high uncertainty."
Japan announced last week that its economy suffered its sharpest contraction on record in the three months to March, shrinking 4.0 percent compared with the previous quarter, but hopes are growing that the worst is over.
"The pace of deterioration in economic conditions is likely to moderate gradually, leading to a levelling out of the economy taken as a whole, given that exports and production are expected to level out and start recovering and the effects of the fiscal stimulus are likely to appear," said Shirakawa.
The BoJ on Friday upgraded its assessment of Asia's largest economy for the first time in almost three years as it held its key interest rate at 0.1 percent, saying the recession appeared to be easing.
It also painted a more positive picture of the outlook in its monthly economic report released on Monday, saying that the pace of deterioration in Japan's economic conditions was "likely to moderate gradually."
Japan entered recession in the second quarter of 2008 as consumers around the world stopped buying big-ticket items during the economic downturn.
But recent signs have fuelled hopes that Japan may be through the worst. Exports and factory output both rose slightly in March from the previous month.
Analysts say, however, that a full-fledged recovery is unlikely while the US and European economies remain weak, given Japan's reliance on exports as the main engine of its economic growth.
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