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Report Indicates Japanese Economy Remains Flat - 2003-05-23

The Japanese economy remained flat in May. For the third straight month, the government kept its assessment of the economy unchanged.

Economic Minister Heizo Takenaka says the outlook is uncertain, but he strikes an optimistic note despite concern that the Severe Acute Respiratory Syndrome spreading in Asia and a weak U.S. economy could drag down growth. Mr. Takenaka told reporters that he hopes the economy will revive. He predicts that the U.S. economy will pick up later this year and that will also boost Japan's economy.

The Finance Ministry says Japan's trade surplus expanded 1.6 percent in April from a year earlier, to $7 billion. It is the first increase in two months. The ministry says exports rose for the 13th straight month.

It credits the sharp increase in exports to shipments to the Asia region. But U.S. bound exports shrank, mainly due to a plunge in the number of Japanese automobiles sold in the United States.

A Finance Ministry official says there is no evidence yet that the outbreak of SARS has hurt demand for Japanese goods. But some economists warn the impact of the disease will most likely cut exports in future months.

Despite concerns about the economy, carmakers continue to speed ahead. Nissan Motor is the latest Japanese auto manufacturer to report record earnings. Nissan says cost cutting and strong overseas sales helped increase its net profit by one-third, to $4 billion in the year that ended in March.

However, analysts warn that automakers should expect a tougher year due to the weaker dollar, which makes Japanese exports less competitive.

One U.S. import to Japan appears to be losing steam after several years of expansion. The Starbucks coffee chain says it lost nearly $4 million in Japan in the year that ended in March, compared with a profit of $6 million the year before. Starbucks says it will cut the number of new store openings in Japan by about a third this fiscal year.