Japan: bolt from the blue

Article Abstract:

Japanese gross domestic product grew by 3% in 1st qtr 1996 which is the strongest rate of growth in a quarter for 23 years. Economists are wary of assuming that growth will continue at this rate for the rest of 1996. The impact of a spending program of $130 billion on public works is likely to dissipate and there is uncertainty over corporate investment and consumer spending. The Bank of Japan is likely to continue to keep interest rates low until Sep 1996 when it should be easier to assess demand from the private sector.

Gross domestic product

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Japan danger

Article Abstract:

Morgan Stanley sees potential problems from a recovery of the Japanese economy. This would bring a rise in interest rates which would push up the value of the Japanese yen and depress government bond prices. There would also be world-wide inflationary pressures as Japanese recovery was added to European and US growth. Japanese investments in overseas assets would also be affected, leading to a global drop in equity and bond prices. The yen carry trade could also be affected.

Interest Rates, Economic aspects, Financial markets

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