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Japan's EPA set to declare recovery in monthly report

TOKYO: In what would be a bit of good news for Japan's beleaguered prime minister, the government's Economic Planning Agency (EPA) will declare this week that the world's second largest economy is showing signs of a sustainable recovery, a financial daily said on Sunday.

The reference to recovery in the EPA report, due out on Friday, would be the first such since April 1997, when Japan's economy hit the skids, the Nihon Keizai Shimbun said.

The brighter economic assessment would bring some cheer to Prime Minister Keizo Obuchi, who has seen his popularity ratings slip recently due to a string of scandals as well as to worries over the economy.

The EPA monthly report will say that "moves toward a self-sustaining recovery are gradually appearing," the paper said.

But while pointing to improved corporate demand and capital spending, the nation's economic planners will also caution that personal consumption is still sluggish and needs to improve in order to ensure a recovery, the paper added.

Gross domestic product (GDP) numbers for the October to December quarter of last year set to be released on Monday are expected to show that the economy slipped back into a technical recession in late 1999.

But some stronger-than-expected data last week has prompted economists to revise up their GDP forecasts, and the average prediction is now for a 1.0 percent contraction for the period.

On Friday, the often-cautious Bank of Japan issued an upbeat monthly report of its own, saying the economy showed signs of emerging from years of recession, spurred on by burgeoning private capital spending.

The rosier data comes as Obuchi has seen support for his government slip, in part because of a string of scandals including police misdeeds and the resignation of his top banking regulator late last month.

Worries about a public debt already the highest among advanced nations has also weighed on voters' minds.

The ratings decline is complicating Obuchi's efforts to decide the timing of a Lower House election, which must be held by October, and raising the possibility that his dominant Liberal Democratic Party (LDP) will suffer a setback at the polls.

Recent surveys showed that more than 50 percent of voters are dissatisfied with Obuchi's government and a growing number are abandoning their support for the LDP.

But an improved diagnosis of the nation's economic health -- especially if coupled with a rise in stock prices -- could help silence Obuchi's critics as well as boost his public support.

Obuchi appears keen to hold the election after Japan hosts the Group of Eight summit of rich nations and Russia on the southern island of Okinawa in late July and LDP Secretary-General Yoshiro Mori said this weekend that a post-summit poll was preferable.-Reuters