Gov`t says economy in `severe situation,` cuts view for 5th month

TOKYO, Feb. 19 Kyodo - Japan's economy ''is worsening rapidly'' and is ''in a severe situation'' as
the country faces its worst recession in the postwar era, with weakness in the
corporate sector dampening household spending, the government said Thursday.
In its latest monthly report, the Cabinet Office downgraded its overall
economic assessment for the fifth consecutive month after data released earlier
in the week showed that Japan's economy contracted in the last three months of
2008 at the fastest pace in nearly 35 years.
Economic and Fiscal Policy Minister Kaoru Yosano said the government has been
forced to repeatedly downgrade its assessments as the economy is worsening
rapidly. He also said consumers have become ''extremely defensive'' amid
growing concern about employment conditions and income levels.
Yosano pledged that the government is resolved to ''prevent at any cost'' an
economic freefall, in which demand, production and consumption all contract in
a negative spiral.
The office last lowered its economic assessment for a fifth month in a row
between February and June 2001.
The February report revised downward the office's assessment of private
consumption, saying it is ''decreasing modestly.'' In January, the office said
consumer spending ''has been weak in tone recently.''
A Cabinet Office official said declining wage levels and a rapid deterioration
in employment conditions have dampened consumer sentiment. Sales of items such
as vehicles, household appliances and clothing were weak in the
October-December period, he added.
The office also cut its view on Japan's imports, saying they are ''declining.''
It said in January that imports were ''gradually declining.''
The official said imports have been falling due to weak domestic demand and
cutbacks in production that have reduced imports of raw materials.
The February report left unchanged descriptions for other areas, saying exports
and industrial production are ''decreasing very substantially,'' corporate
profits are ''falling substantially,'' business investment is ''decreasing''
and the employment situation is ''getting worse rapidly.''
The official said the current pace of economic deterioration is
''unprecedented'' and that various indicators suggest that Japan is mired in a
deep recession.
As for short-term prospects, the report retained the view that the economy is
''likely to continue worsening for the time being'' and that there is ''fear
that the rapid reduction in production will lead to significant adjustments in
employment.''
On the global economy, the Cabinet Office downgraded its assessment for the
sixth consecutive month, saying the global downturn ''has been rapidly getting
severe.'' It warned of a ''negative spiral'' in which weakness in the financial
sector and in the real economy feed off each other to drag the economy down
further.
The office lowered its assessment of economic conditions in the United States,
Europe and the Asian region other than Japan given shocking gross domestic
product data for the last quarter of 2008 released recently.
U.S. GDP in the October-December quarter shrank an annualized real 3.8 percent
from the previous three months, while the eurozone economy contracted 5.7
percent. In Asia, export-dependent South Korea and Singapore saw annualized
contractions of 20.8 percent and 16.9 percent, respectively, in the same
period.
==Kyodo