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Japan - Facing Dark Cloud of Recession - 2001-09-07

Tokyo stocks ended the week lower, after the government offered fresh evidence Friday that the world's second largest economy is teetering on the brink of recession.

The stocks headed lower Friday, after the release of gross domestic product (GDP) figures, which showed that the economy is deteriorating. The government said the economy shrank .80 percent in the second quarter of the year compared with the previous three months.

On an annual basis, the economy contracted by 3.2 percent in that quarter. The news was bad, but it was also widely expected.

Japanese Economy Minister Takeo Hiranuma told reporters that recession is now a likelihood. He says he thinks that the economic situation is extremely severe. He adds that if the present situation continues, Japan is unlikely to have even zero growth this year.

The data sent the blue chip Nikkei Average down 1.25 percent. Computer and chip maker NEC was a big loser, plunging more than six percent. Analysts say they are expecting a downward revision of the company's profit forecast.

Mobile phone giant NTT DoCoMo also fell, losing more than four percent to a 29-month closing low.

The GDP figures also weighed on the Japanese yen, sending it to 121.33 on the dollar in Tokyo trading.

On other Asian trading floors, the mood was generally somber. Hong Kong stocks ended on a down note. Mobile phone company China Mobile and Conglomerate, Hutchison Whampoa, lost ground on concerns about the health of the global cell phone industry. Banking and real estate stocks also dropped, with investors pessimistic about the state of the local economy.

Singapore's Straits Times Index finished in the red for the second day running. A warning on poor sales by American cell phone giant Motorola depressed several Singaporean firms, which supply it with parts. Chartered Semiconductor lost more than five percent.

South Korea managed to buck the negative trend. It closed with a small gain, as index heavyweight Samsung Electronics rose more than 1.3 percent. Cash-strapped chip maker Hynix semiconductor jumped more than 15 percent, boosted by an anticipated bailout package and the sale of its flat screen unit.