Bad to worse

Article Abstract:

The Japanese economy has gradually moved into recession, and there is concern that only government action can trigger a recovery. Companies are cutting capital spending, so this is not likely to act as a defense against recession. Sony chief executive and chairman, Norio Ohga, has called for a fiscal stimulus, though this would prevent the government from tackling budget deficit problems. A weak Japanese yen would help the economy. Meanwhile, the banking industry is still fragile, despite help from the government.

Recessions

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In the doghouse

Article Abstract:

Japan's fourth economic stimulus package has been criticized as inadequate by the Group of 7. There is international pressure for Japan to use fiscal measures to stimulate its economy and help economies affected by a financial crisis in the region. Markets may put the Japanese government under pressure to act, but there is no certainty that action would have the desired result. Tax reductions and public works programs may not boost the economy and could leave the government with a bigger deficit than before.

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The only way out

Article Abstract:

NatWest Markets argues that there is a need for a boost from fiscal policy for the Japanese economy. Domestic demand has been weak, while the export sector has been strong, but exports are likely to be hit by the crisis in Asian financial markets. Inventories of chemicals, electronics and cars are likely to become a problem and a fiscal stimulus appears to be the only solution. Monetary policy is already geared to the problem, which only leaves fiscal policy.

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