Japanese Prime Minister Junichiro Koizumi meets with Cabinet ministers later Wednesday to draw up a series of deflation-fighting measures. The meeting comes just ahead of a summit meeting with President Bush.
Japan's ailing economy will likely be at the top of President Bush's agenda when he arrives in Tokyo Sunday for talks with Prime Minister Koizumi and other top officials.
With concerns growing both at home and abroad about the vulnerable state of the world's second largest economy, the government has promoted deflation-fighting to its chief priority. Mr. Koizumi has promised that his administration will adopt comprehensive measures to end the current deflationary spiral.
Japanese government spokesman Yasuo Fukuda says "Tokyo will employ the new measures as soon as possible."
Deflation, or falling prices, depresses consumer demand, hurts corporate cash flow and makes debts more difficult to service.
Underscoring heightened concerns about the Japanese economy, global credit rating agency Moody's Investors Service said Wednesday that it could downgrade Japan's domestic debt-rating by two notches. It said it would review the matter, and noted that, the longer it takes for Tokyo to come up with an effective policy, the more difficult it will be to solve other economic problems.
However, it also said that Japan's economy has considerable strengths, such as a large pool of domestic savings.
Tokyo confirmed Wednesday that Japan's economy contracted by half-of-one-percent in the third quarter of last year, in line with its original estimate. Economists also said that the current recession is expected to be the longest in the past decade, and is expected to last at least until mid-2002.