A Japanese panel chaired by Prime Minister Junichiro Koizumi plans to drop the economic growth target of 1.7 percent for this year and warn of near-zero growth for up to three years, a report said Saturday.
The government's Council on Economic and Fiscal Policy plans to announce the new forecast when it releases reform policy guidelines in late June, the Asahi Shimbun said.
It foresees the world's second largest economy growing only 0.5 percent for two-to-three years from April 2001, the daily said.
The panel would then drop the official growth target of 1.7 percent for the current financial year to March 2002, it said.
While stopping short of mentioning a specific figure, Heizo Takenaka, state minister for economic and fiscal policy, Saturday conceded the panel saw near-term growth "will be far below Japan's potential rate of growth."
Takenaka made the remark in the rural northern Japanese city of Aomori where he attended a town hall meeting along with Agriculture, Forestry and Fisheries Minister Tsutomu Takebe.
Takenaka is the key man of the government council and on a mission to get people's understanding of "structural reform without sanctuaries" under the Koizumi cabinet.
Japan's gross domestic product contracted 0.2 percent in the three months to March, putting growth for the previous financial year at an anaemic 0.9 percent against the government's goal of 1.2 percent.
The council also expects the number of jobless people to increase by some 150,000-200,000 as the government pushes ahead with structural reform such as the disposal of bad loans held by banks, the Asahi said.
Japan's jobless rate rose to 4.8 percent in April with 3.48 million people out of work, latest government data showed.
The council projects some 500,000 people would lose their jobs as banks wipe 12.7 trillion yen (105 billion dollars) of bad loans off their balance sheets, causing borrower companies to fail or cut payrolls, the Asahi said.
It estimates 150,000-200,000 people of the 500,000 would not find new jobs and would become unemployed, the daily said.
The depressing figures were to be announced at the initiative of Takenaka, the newspaper said.
Takenaka believes concrete figures would make it easier for people to understand the council's scenario for an economic revival, it said.
Draft policy guidelines presented by the minister to the council on May 31 included a review of Japan's tax system, capping issuance of government bonds at under 30 trillion yen and generating five million new jobs.
Koizumi said Thursday Japan was "in a correctional phase" as the government downgraded a key economic assessment for the fifth consecutive month and pointed to recession.
"We have to endure the pain for a better tomorrow. There will be no economic recovery without structural reform."
The Cabinet Office said in its June report "the economy is deteriorating," using stronger language than in May when it said "the economy is increasingly weakening."
"Although we have yet to be able to arrive at a conclusion, there is a strong possibility that the economy has entered a recession," Cabinet Office economist Haruhito Arai said -- TOKYO (AFP)
Japan was last in recession at the end of 1999.
The Council on Economic and Fiscal Policy projects the Japanese economy would be able to return to growth of about two percent after the intensive correction period of two-to-three years, the Asahi said.
© 2001 Al Bawaba (www.albawaba.com)
