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Japanese Govt. Says Economy Recovering
The Associated Press
Friday, February 20, 2004; 8:19 AM
TOKYO - The Japanese government reaffirmed Friday that the economy is improving, saying that growing exports and corporate investments were powering a recovery that began last year.
The cabinet said in its February report that industrial activity and consumer spending at home were picking up and a long-running decline in goods prices had leveled off.
But it also said key industries remain vulnerable to a strong Japanese yen, which makes exporters' goods more expensive abroad and erodes the value of their overseas earnings.
The U.S. dollar had dropped to three-year lows of 105 yen in recent weeks, but has since recovered due in part to intervention by Japanese financial authorities. Late in Tokyo Friday, the dollar was trading at 107.91 yen.
"We can't let our guard down," Finance Minister Sadakazu Tanigaki said Friday.
The report comes after the government announced Wednesday that the economy expanded a better-than-expected 1.7 percent in the last three months of 2003 - the biggest increase in more than a decade. The last time the economy grew at a faster clip was in the April-June 1990 period, when it expanded by 2.5 percent.
The Japanese economy has grown for four straight quarters, and grew a healthy 2.7 percent in 2003, after stagnating for more than a decade. Companies are reporting better profits and investing more in new plants and machinery but deflation, the spiraling down of prices that has lasted for five years, continues.
In its January report, the government removed stock market fluctuations from its list of potential threats to the economy. The main index of the Tokyo stock market has extended its surge above the 10,000 mark after striking 20-year lows in April last year.
The Nikkei Stock Average of 225 issues closed Friday down 0.31 percent at 10,720.69 points.
The Japanese government is forecasting economic growth of 2 percent for the fiscal year ending March 31.
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