December 15, 2001	Saturday	Ramazan 29, 1422

TOKYO, Dec 14: Japan said on Friday its latest extra budget could halt economic contraction in the next fiscal year, but the bullish projections failed to convince financial markets which knocked the yen to multi-year lows.

Key ministers of Prime Minister Junichiro Koizumi’s administration issued a report projecting that a 2.5 trillion yen ($19.6 billion) second extra budget currently being compiled would boost gross domestic product (GDP) by a real 0.9 per cent and a nominal 1.2 per cent in the coming year.

With such a stimulus effect and a widely expected US recovery next year in mind, government forecasters will publish next week a forecast for zero growth in fiscal 2002/03 starting April 1 — far more optimistic than the consensus among independent economists, who expect a second year of contraction.

“When you add up all the demand-side factors, the outlook is neither plus nor minus,” a government source told Reuters.

Economics Minister Heizo Takenaka cited the stimulus effect of the government’s two extra budgets totalling 5.5 trillion yen for the upbeat — relatively speaking — outlook, saying economists had yet to take account of the specifics of the second package currently being compiled.

“Basically, private sector forecasts have not factored in specific policy steps that would be included in the second extra budget,” Takenaka told a news conference.

The ministers’ report said the second budget package, expected to pass parliament in January, would generate 110,000 jobs and trim the unemployment rate by 0.1 per centage point. The jobless rate is currently running at a record 5.4 per cent.

BANKRUPTCIES ON RISE: The market’s concerns about the lingering bad-loan problem in the banking sector which has crippled the economy was underscored by a sharp drop in share prices of several banks and a sobering bankruptcy data.

Research firm Teikoku Databank said the number of corporate bankruptcies in November rose 10 per cent year-on-year to 1,851 cases, the highest total for a November since World War Two.

Teikoku said 1,419 of the November bankruptcies, some 76.7 per cent of the total, were caused by prolonged economic weakness.

The November failures included some big listed companies which in their heyday had been considered blue chips, such as Taisei Fire & Marine Insurance Co Ltd and Niigata Engineering Co Ltd.

The December failure of mid-sized Japanese contractor Aoki Corp has sowed further worries about the viability of weaker firms as Japanese banks fast lose their ability to support ailing borrowers, and Teikoku warned that failures of listed firms could continue to gain speed.—Reuters

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