OECD eyes 0.7% growth in Japanese economy for 2010

TOKYO, June 24 Kyodo - The Organization for Economic Cooperation and Development projected Wednesday a deeper contraction in the Japanese economy in 2009 than earlier forecast but said the global economy is recovering from the worst recession since World War
II, with Japan expected to grow a real 0.7 percent in 2010 from this year.

The Paris-based club of 30 wealthy nations also warned that the impact from the
government's economic stimulus packages will begin to fade next year, stressing
the need to boost domestic demand.
Japan's real gross domestic product is likely to shrink 6.8 percent this year,
the OECD said in its biannual report, revising down its projection in March of
a 6.6 percent contraction.
For 2010, however, it expects the Japanese economy to get back on a growth path
and expand 0.7 percent, against the earlier forecast of a 0.5 percent
contraction. It would be the country's first positive growth in three years.
For the OECD economies as a whole, the report said they will shrink 4.1 percent
this year, better than the earlier projected 4.3 percent contraction but still
the sharpest decline in the postwar era. In 2010, they are expected to grow 0.7
percent, upgraded from minus 0.1 percent.
The United States is projected to contract 2.8 percent in 2009, upgraded from
the 4.0 percent shrinkage projected in March. The world's biggest economy is
expected to grow 0.9 percent in 2010, also revised up from a zero growth
forecast, the OECD said in its Economic Outlook report.
The 16-nation eurozone is likely to shrink 4.8 percent this year, downgraded
from the earlier forecast of a 4.1 percent contraction, before marking zero
percent GDP growth next year, up from minus 0.3 percent.
The ''ensuing recovery is likely to be both weak and fragile for some time,''
the organization warned, adding that the negative impact of the global economic
crisis will be ''long-lasting.''
But it also said the current results ''could have been worse,'' adding,
''Thanks to a strong economic policy effort an even darker scenario seems to
have been avoided.''
As for the Japanese economy, the report said the sharp recession triggered by
the global crisis may be ''the most severe in Japan's postwar history.''
Uncertain prospects for the world economy have caused a number of risks to the
economy including falling output, downward pressures on economic activities and
rising unemployment rates.
Randall Jones, an OECD economist, said Japan's positive growth will start in
the third quarter of this year due mainly to the government's fiscal stimulus
packages and continue next year, although at a modest pace.
''Positive news for Japan would be that China is seen to be recovering very
strongly now thanks to strong stimulus from fiscal and monetary policies,'' he
said in a televised press conference.
But Jones also said the positive effect of Japan's fiscal stimulus steps, the
equivalent of 4 percent of the country's GDP, may start fading in 2010, and the
government needs to boost domestic demand such as individual consumption and
business investments in order to spur the nation's growth into next year.
Although the stimulus is important, the OECD report said, the government also
needs to focus on fiscal consolidation, given the large budget deficit and high
public debt ratio. It added that reforms in taxation and social security
systems are a key to that end.
On some brighter aspects, the international body said recovery in exports
against the backdrop of a faster-than-expected rebound in world trade as well
as some weakening of the yen against other major currencies ''would result in
stronger-than-projected export and output growth in Japan.''
==Kyodo