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Friday, Aug. 8, 2008

Cabinet Office report points to recession

Staff writer

With the word "weakening," the Cabinet Office on Thursday effectively called an end to the longest expansion of the postwar period.

In its report for August, the office did away with the July phrasing that the recovery is pausing, making it clear the economy is heading downward instead of staying flat.

During the 6 1/2 years of expansion since February 2002, there have been three occasions when the economy was described as flat.

This is the first time since May 2001 the monthly report has used the word "weakening," except in February 2003, but at that time the economy was on an overall uptrend, unlike now.

The August report does not use the word "recovery," which had appeared every month since January 2004.

For months now, a growing number of market watchers and analysts have been saying Japan is in a recession. The monthly report doesn't say anything about this, but the Cabinet Office official who briefed reporters said, "There is a possibility that the economy has entered a recession."

An official judgment of whether the nation is in a recession will be made retroactively by the experts at the Economic and Social Research Institute, a Cabinet Office think tank.

The major reason the Cabinet Office downgraded its assessment, the official said, was due to weaker exports and a resulting drop in production. Inventory is also rising, meaning production will not rise in the near future.

Industrial production in June fell by a seasonally adjusted 2 percent from the previous month for the first decline in two months.

"As for short-term prospects, weak movements are likely to continue for the time being," the report says, adding conditions could worsen depending on the extent to which the U.S. economy slows.

The report also notes that employment has a "weak tone" based on the rise in the jobless rate, downgrading the judgment for the first time in six months. The unemployment rate rose to 4.1 percent in June from 4.0 percent in May.

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The Japan Times

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