----- Original Message ----- From: Mark Jones <[EMAIL PROTECTED]> To: crl <[EMAIL PROTECTED]> Sent: Friday, March 09, 2001 7:36 AM Subject: [CrashList] Japan 'on verge of collapse' Minister's warning sends chill through world's second biggest economy Jonathan Watts in Tokyo Friday March 9, 2001 The Guardian Japan's public finances are in danger of collapsing under the weight of the world's biggest national debt, the finance minister, Kiichi Miyazawa, said yesterday in a dire warning about the world's second biggest economy. "The nation's finances are now abnormal, in a condition that is quite close to collapse," he told the Japanese parliament in an unusually frank appraisal of Japan's fiscal health. "We need fundamental restructuring to rebuild our finances. It will be necessary to introduce measures to reduce debt, as well as dealing with taxes, local government finances and social security." The doom-laden comments came amid a cluster of gloomy economic data that helped to push the Japanese currency to a 19-month low of more than 120 yen to the dollar. The comments are a virtual admission that the government's attempt to spend its way out of a 10-year economic slump have failed. Japan has introduced more than a dozen pump priming packages totalling more than 111 trillion yen (#653bn) since the economic bubble burst at the end of the 1980s, but in the past five years, it has rarely managed to eke out an annual growth rate of even 1%. The country's addiction to public works has produced a rocketing public debt, which - including central and local governments - is forecast to hit 666 trillion yen (#3.9 trillion), or 128% of national output, by the end of this fiscal year. Coming from the octogenarian Mr Miyazawa, one of the biggest spending finance ministers in history, and who is usually criticised for the delphic nature of his statements, the warning was a shock to many analysts. "A national minister saying the country's finances will collapse is akin to a company president saying his company will fail," a Sanwa Bank currency dealer, Mitsuru Sahara, said. The alarm may have been intended to lower expectations ahead of quarterly gross domestic product data due out on Monday and expected to show that Japan has only just avoided its third recession in five years. Yesterday, a steep fall in machinery orders intensified concerns that Japan's economy, which is bigger than the rest of Asia combined, is deteriorating faster than expected because of weakening export markets in the US and the prolonged stagnation of domestic demand. The orders, which are seen as an indicator of capital investment, fell 11.8% in January, almost twice as far as analysts had expected. Separate data on consumption added to the growing fears of deflation that have been expressed by the Bank of Japan. According to the home affairs ministry, average household spending declined by 0.5% in January. The full economic picture is still far from clear as other figures suggested that corporate investment was up 7.1% in the final three months of last year, while total company pre-tax profits also increased. Politics may be behind the alarmist comments by the finance minister, who is expected to stand down soon, along with the unpopular prime minister, Yoshiro Mori. Mr Miyazawa may feel more free to speak his mind in an attempt to influence the direction of the next government's policies and to increase pressure on Mr Mori, who could quit as early as today, to resign. Guardian _______________________________________________ CrashList website: http://website.lineone.net/~resource_base
