Japanese growth forecast modified

Japanese growth forecast modified

TOKYO (AFP): The Japanese cabinet modified yesterday its
growth forecasts for the coming year to take into account the
earthquake in western Japan as Nomura Research Institute
projected a major stimulus over two years.

"Next year's figures should be considered with some margin,"
Economic Planning Agency director-general Masahiko Komura said
after the cabinet approved the agency's official growth forecast
for the year starting in April.

Komura told a news conference that the quake would add an
"unpredictable factor" to the agency's forecast of 2.8 percent
growth in gross domestic product (GDP) for the upcoming fiscal
year.

Government officials said the phrase had been added to the
agency's official forecast to qualify the projection announced in
December.

"It is hard to predict the impact because it will cause both
negative and positive effects," Komura said. But he added: "I
don't think there will be a large difference."

International Trade and Industry Minister Ryutaro Hashimoto
reportedly questioned the relevance of the GDP forecasts.

"My question is whether or not projections made before the
earthquake are really useful," he said.

"The quake's impact on the future is very serious," Hashimoto
said. "Our attention is focussing on the hardest-hit Kobe area
but significantly serious effects are already emerging in its
environs such as Osaka.

But Nomura Research Institute reckoned the earthquake would
boost GDP by between 1.5 percent and 2.9 percent over two years.
The affiliate of Japan's top securities firm, Nomura Securities
Co. Ltd., also said that quake-related import demand was likely
to range from 900 billion yen and 2,000 billion yen (US$9 billion
and $20 billion).

Nomura estimated earthquake damage at anywhere between four
trillion yen and eight trillion yen ($40 billion and $80
billion), accounting for between 0.8 percent and 1.6 percent of
gross domestic product.

Beneficial

The institute said that while the devastation would have a
negative effect on the economy at first, the long-term impact
would be largely beneficial, echoing similar remarks made by
other economists over the past few days.

Potential recovery demand could have the effect of expanding
the economy by between 0.5 percent and 1.0 percent in the fiscal
year starting in April. But domestic production is likely to
contract in the short term with GDP for the current quarter
ending in March shrinking by 0.3 percent to 0.8 percent.

The Japanese government meanwhile said it would start
monitoring the prices of more than 70 commodities including
consumer goods, raw materials and foods amid fears of quake-
induced inflationary pressures.

An economic planning agency official said the monitoring
procedures, to started next week and to last for about two weeks,
would be carried out by three ministries and agencies and also
cover distribution costs.

Under the new measures, the international trade and industry
ministry will monitor prices for such commodities as oil, steel
and cement. The agriculture, forestry and fisheries will monitor
food prices and the economic planning agency will follow the
prices of daily necessities, the official said.

Despite initial fears that the quake would boost prices for
industrial materials, little evidence of inflationary pressures
has been observed so far. Even steel prices have been relatively
stable despite the closure of two steelworks operated by Kobe
Steel Ltd.

The Yomiuri Shimbun reported yesterday that steelmakers,
cement producers and glass manufacturers had more than enough
capacity to meet an expected 10 percent increase in demand for
their products in the aftermath of the quake.

Steel demand is likely to be boosted by anywhere between
500,000 tons and 800,000 tons with the rebuilding of apartments,
offices, highways, bridges and port facilities, the newspaper
said.

The Nihon Keizai Shimbun reported separately that
manufacturers of instant noodles, pre-cooked rice and batteries
were already boosting production to meet strong demand and cover
reduced output at plants in the Kobe area.