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Japanese Economy Expanded at End of Last Year - 2003-02-14

Japan's economy unexpectedly grew for a fourth consecutive quarter. Gross domestic product rose point five-percent in the three months to December from the previous quarter. That translates into an annualized expansion of two percent.

Overseas demand for Japanese cars and other exports fueled the rise, as did a slight recovery in consumer spending.

The figure was much stronger than many economists had expected. But they warn the outlook remains gloomy, with Japan's economy still burdened by long term woes, including deflation and record unemployment.

Japanese employers and workers traditionally hold annual talks every February to hammer out agreements on pay hikes and other benefits.

But this year, given the country's long-term economic slump, many workers are ready to sacrifice higher pay for job security. For the first time, some labor unions say they will stop demanding wage hikes related to seniority so that more workers can keep their jobs.

Hiroshi Okuda, Chairman of the Japan Business Federation and the head of Toyota Motors, said that companies will lose global competitiveness if they do not cut wages. He adds that both employers and employees must understand.

Unions at major Japanese companies are now submitting requests on wages and management is expected to reply in about one month.

Bank of America is cutting its staff in Japan, firing half of its employees in the country due to a slowdown in business. The bank, which has operated in Japan for more than half a century, will move its currency trading operations to Singapore and close a unit, which buys distressed Japanese companies.

Other foreign banks and securities houses have also recently reduced staffing in Japan, including Bank of New York and Societe Generale of France.