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Saturday, Jan. 6, 2007

BUSINESS LOBBIES UPBEAT

2% economic growth seen in '07


Staff writer

Leaders of Japan's three major business lobbies were upbeat Friday about the country's economic prospects for 2007, saying the economy is likely to grow 2 percent this year on the back of a strong recovery in the business sector.

News photo
Prime Minister Shinzo Abe speaks Friday in Tokyo during a year-opening party for corporate executives, including (from left) Kakutaro Kitashiro, chairman of the Japan Association of Corporate Executives (Keizai Doyukai), and Nobuo Yamaguchi, chairman of the Japan Chamber of Commerce and Industry. SATOKO KAWASAKI PHOTO

"The first half of the year may be slow due to a slowdown in the U.S. economy, but the latter half will be better," said Fujio Mitarai, head of the Japan Business Federation (Nippon Keidanren). "Japan can achieve a growth rate of about 2 percent."

Mitarai also said the 225-issue Nikkei stock average may top 20,000 by the end of the year, reflecting Japan's brisk economy.

On Friday, the Nikkei average closed at 17,091.59 yen, down 262.08 points from a day earlier.

Mitarai, who is also chairman of Canon Inc., and two other business leaders, Kakutaro Kitashiro, chairman of the Japan Association of Corporate Executives (Keizai Doyukai), and Nobuo Yamaguchi, chairman of the Japan Chamber of Commerce and Industry, spoke at a news conference at a Tokyo hotel following a year-opening party organized by the three groups.

However, the three business leaders also voiced concerns about higher prices for raw materials, including oil, and the potential for a weaker U.S. economy to act as a drag on Japan.

Speaking at the event, Prime Minister Shinzo Abe hinted that since businesses are enjoying higher earnings, they should share more of the fruits of their success with workers.

"This year, I would like the people to feel the economic recovery," Abe said in his speech. "I ask the three groups to cooperate with us so that the economic recovery will spread into the household (sector)."

Despite the continuing economic expansion, consumer spending remains weak because workers' wages have not risen in tandem with corporate profits.

However, Keizai Doyukai's Kitashiro said at the news conference that it is up to each company to decide the wage levels of its employees.

The three business leaders urged the government to promote fiscal reform to repair the country's tattered finances.

Kitashiro said Abe should propose a detailed plan with a time frame for fiscal reform to ensure sustainable economic growth.

Commenting on a possible interest rate increase by the Bank of Japan, Yamaguchi said a rate hike will negatively affect small and midsize firms.

He said the BOJ should thoroughly explain to the public that the rate will still be low even if it is raised.

"The BOJ should emphasize that a rate increase is not due to inflation and that it will maintain its easy-money policy," Yamaguchi said.

Speculation is rife that the BOJ may raise the interest rate in its Jan. 17-18 Policy Board meeting.



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