Land of the rebounding economy

After enduring a recession as dark as an eight-year night, Japan is awakening to some apparently rosy economic trends.

Japan's outlook is vital to workers and investors worldwide.

A revival in the world's No. 2 economy would energize stagnant East Asia; continued slack in Japan could worsen a spreading global recession, say analysts.

Yet a range of "incoming data have broken to the upside," says Stephen Roach, chief economist at Morgan Stanley Dean Witter in New York.

Household spending grew more in January than in any other month for 16 months, according to government statistics.

Interest rates, and so the cost of borrowing, have fallen close to zero. Business confidence is rising and the number of business failures fell 40 percent in February compared with the same month last year.

In the past year, the government has stoked the economy with $830 billion in public spending. Part of it has gone to 15 major banks in a sweeping effort to wipe out bad debt and spur restructuring.

The government has also loosened the money supply. Since February, the Bank of Japan has given a $17 billion cash infusion into the economy. This action has weakened the yen, which will in time boost exports.

And some of the new money may have sloshed into the stock market, buoying the Nikkei price index in March by more than 10.2 percent.

But some analysts say the "Land of the Rising Sun" is not seeing a new dawn but rather the glow from a continued meltdown.

The government, they say, pursued stop-gap measures to revive financial markets and head off a flaring of bankruptcies before the end of the fiscal year on March 31.

Japan did a good job in "improving markets ahead of the fiscal year-end," says Carl Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y.

Stock values are a key entry on the balance sheets of many firms. So a market loss for the year could tip many into bankruptcy.

"A rash of business failures after company results for this fiscal year are reported in April could set off another round of stock-market declines and credit contraction," Mr. Weinberg warns.

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