Japan's economy could grow 1.5-2% in next 2 years: analyst

Asian Economic News, June 12, 2000

HONG KONG, June 5 Kyodo

Japan's economy can grow between 1.5% and 2% over the next couple of years, although there is a risk of government policy-mistakes as a result of the current political vacuum, a Japan-based analyst said Monday in Hong Kong.

Jesper Koll, chief economist at Merrill Lynch Japan, told a press conference in Hong Kong that in the next 12 to 15 months, the "catchword" for Japan's economy is "steady progress."

Koll anticipates the private sector in Japan is going to perform much better than most people expect and that Japanese firms will be active again in investing in other parts of the world.

But the economy could be undermined if policy mistakes are committed, he warned.

There are risks the government might prematurely raise interest rate or tighten fiscal policy as a result of a possible weakened political leadership due to infighting within the Liberal Democratic Party (LDP) and between the LDP and its coalition partner the New Komeito party, the analyst said.

He did not forecast the results of the general election set for June 25.

The Japanese economy, Koll said, is expected to grow as more Japanese technology companies gain market share throughout the world.

Koll said big companies such as Toshiba Corp., Hitachi Ltd. and Sony Corp. are now competing with U.S. firms, making inroads and gaining market share in the areas of information technology and technology media.

The shift of global technology toward a mobile model will benefit Japanese companies in tapping the world market, Koll added.

Recapitalization of Japan's financial system and continuation of an excessive savings in the domestic economy will also help drive Japanese firms to invest overseas this year, especially in technology and basic industrial sectors, he said.

As a result, "by Christmas" the dollar is likely to trade between 115 yen and 120 yen, rather than a range of 85 yen to 90 yen, Koll added.

Bruce Steinberg, a New York-based economist at Merrill Lynch and Co., said the dollar will rise against the yen because U.S. economic growth is moderating.

Given benign U.S. employment figures released Friday, Steinberg suggested the U.S. Federal Reserve will not further raise interest rates later this month.

The risk of a hard landing in the U.S. economy is also negligible, he said.