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Tuesday, 21 October 2008

Japan government:Singapore and South Korea economy weak

TOKYO -- Two economic reports on the state of Japan painted a bleak picture for the world's second-largest economy, with expectations of sluggish growth as the financial environment continues to deteriorate.

Japan's government cut its overall assessment of both the domestic and overseas economies in a new monthly report issued Monday, saying the downward trend will be likely to continue as financial conditions in the U.S. and Europe worsen.

The government cut its view of the domestic economy in its October report for the first time in two months, saying the economy "has weakened further."

It also cut its assessment of the global economy to "slowing down," while judging the U.S. economy is "in a recession." It was the most pessimistic view of the U.S. since December 2001.

The October report also downgraded the assessment of Asia's economies, noting "a weak tone" in some areas, particularly Singapore and South Korea.

The government said the downward momentum of the world-wide economy could further accelerate if financial conditions continue to deteriorate.

"Attention should be given to the risks that economic conditions will become more severe due to the worsening financial crisis and to large fluctuations in the stock and foreign exchange markets," the report said.

The grim picture of the domestic and overseas economies provides justification for a new economic stimulus package expected from the administration of Prime Minister Taro Aso.

At the same time, the Bank of Japan Monday downgraded its core economic assessment of the nation's regional economies in its October report, with all nine regions cutting their economic views for the first time in the report's brief history.

"Economic growth has been sluggish in general, mainly due to the effects of earlier increases in energy and materials prices and weaker growth in exports, although there were some regional differences," the central bank's quarterly Regional Economic Report for October showed.

Eight of the nine regions had lowered their assessments in the previous report, issued in July, but Monday's report marked the first time all nine regions lowered their economic views since the bank started releasing the so-called sakura report in April 2005.

Assessments differed by region, but the overall trend is clearly downward. The BOJ last downgraded its overall assessment of regional economies in April, and in July maintained that the domestic economy was "slowing" due to the effects of high energy and raw material prices.

The BOJ also revised down its assessments of some major economic items. Corporate sentiment has grown more cautious, the report found, and business investment has been falling overall, though it remained flat in some regions, the report showed.

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