Experts addressing the World Economic Forum in New York are divided about the meaning of recent data showing a possible upturn in world economic growth. However, there is agreement that Japan's economy is showing no signs of recovery.
Japanese vice minister of finance Haruhiko Kuroda said much more work is required to restructure Japan's inefficient financial sector. Mr. Kuroda said once those reforms are complete, Japan should return to sustained growth. "Such structural reform is, I think, absolutely necessary," he said. "And that would make our economy grow faster later and that would be better for the global economy."
But U.S. economic analyst Fred Bergsten, a long time observer of the Japanese economy, is skeptical about whether genuine structural reform will take place. "The problem, and here I guess I would differ from the minister's implication, I do not see the structural reforms being made," he said. "And in the absence of those reforms, particularly in the banking system, I would fear that it (the economy) gets worse."
Mr. Bergsten is disturbed by the dollar's recent strenthening against the yen. He worries that the dollar is too strong and that an eventual decline of the dollar could get out of hand and weaken the world economy. "I actually think the U.S. trade deficit and the likely decline of the dollar are the biggest sources of risk to the U.S. economy over the next couple of years," he said. "And therefore probably the greatest source of risk to the world economy as a whole."
Not surprisingly, U.S. treasury secretary Paul O'Neill, who also addressed the economic forum, is not worried about the dollar's strength. He is optimistic that the U.S. is heading out of recession onto a stable and long-term path of growth.