Japan's Takenaka gives bleak view of economy

Reuters Tokyo

Japanese Economics Minister Heizo Takenaka on Friday gave a bleak view of the ailing economy, saying he believed it to be in a more severe state than the government's official assessment suggested.

"We have to make a comprehensive judgment based on all available data, but in my personal view the economy is becoming more severe," he told a news conference, hinting the government may downgrade its economic assessment in its November report.

In October, the government maintained its already grim view, saying "the economy continues to deteriorate", and highlighted the risks in the wake of the Sept.11 attacks in the United States.

Japan's economy, reeling from weak domestic demand, has been dealt a further blow by the sharp slowdown in the U.S., where the economy fell at an annualized 0.4 percent in the third quarter.

Japan's economy is also expected to post a contraction for the July-September quarter, which would put it technically into recession, its fourth in a decade.

The government seems resigned to a contraction for the entire year.

Takenaka said he would announce a revision to the government's growth forecast of 1.7 percent for the current fiscal year when the government submits an extra budget to parliament, likely next week.

The Bank of Japan's nine-member Policy Board on Monday produced a core forecast for economic contraction of between 0.9 and 1.2 percent for the current fiscal year ending in March.

Takenaka declined to say whether he thought the economy was on the brink of a deflationary spiral, but said he would closely watch consumer confidence, income and personal consumption.