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Japanese Economic Growth Stalls - 2003-05-16

Japan's economic growth has stalled, and analysts now worry the country may be heading back into recession. The news follows new figures showing a fall in exports.

Gross domestic product growth was flat in the first quarter of the year, ending four straight quarters of slow but steady economic growth in Japan. The government on Friday blamed the flat growth in part on weak exports, and a decline in both corporate and personal spending in the first three months of this year.

Now many economists say they fear the economy could soon fall into a recession, particularly because the SARS crisis in much of Asia may lead to a further drop in exports and hurt the travel industry. Japan has suffered repeated recessions since 1990.

Earlier this week, Japan announced its current account surplus for the month of March was down 27 percent from last year's figure. The Finance Ministry partly blames the $14 billion contraction on declining exports to the United States. The surplus also took a hit from soaring oil prices before and during the war in Iraq.

The current account picture is not all bleak, however. For the full year to March, the current account surplus, the broadest measure of Japan's trade with the rest of the world, expanded by 12 percent from the previous year. This is the first increase in four years. Japan's economy is highly dependent on exports and it typically has very large trade surpluses.

NTT, Japan's largest telecommunications group, posted a profit for the fiscal year that ended in March. The company announced it earned a consolidated net profit of two billion dollars. This is a sharp turnaround from the loss of $6.5 billion last year. But sales dipped due to tougher competition in the shrinking fixed line telephone market.

Credit for the overall improvement goes to cost cutting and to better sales and profits at mobile phone unit, NTT DoCoMo. NTT President Norio Wada is telling reporters he doubts further cost cutting will make a difference this year. He says NTT needs to focus on strengthening its fiber optic and IT services to gain new sources of revenue.

The former government monopoly plans to slash nearly four thousand jobs in addition to the 16,000 jobs trimmed last year.