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Friday, 30 August, 2002, 02:31 GMT 03:31 UK
Japan recovers from recession
Japan shopping district
Japanese are still reluctant to spend

The Japanese economy has recovered from one of its worst recessions but it remains heavily dependent on growth in the United States.

The latest figures show gross domestic product was up by 0.5% in the three months to June.

But economists say the recovery is a weak one and depends too much on continuing growth in exports.

Japan's preliminary growth figures have been notoriously unreliable in the past but this time the government is including more hard production data to give them credibility.

It has revised the sparkling first quarter boost of 1.4% down to no growth at all.

And revisited data on Friday showed that Japan's economy recorded four successive quarters of contraction last year.

System fragile

In the three months to June, the economy did finally begin its recovery from a deep and prolonged recession.

The growth of 0.5% was slightly better than expected but it remains unbalanced, highly dependent on exports to the United States and Asia.

Even here there are worrying signs - industrial production fell in July, indicating the export boom could be running out of steam.

There is still no sign of a pick-up in domestic demand that will be necessary to generate a strong and sustainable recovery.

Unemployment remains close to an all time high at 5.4% and consumer prices continue to fall - a sign that debilitating deflation still has a grip on the Japanese economy.

People are reluctant to spend when they know goods will be cheaper in a month or a year.

They are also saving more because of insecurity about jobs.

The financial system remains fragile and economists worry that the government is back-tracking on a promise to clean out and revitalise the banks.

There is relief that the recession is over but there is little optimism about Japan's longer term prospects.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Alex Ritson
"The growth of half a percent was better than expected."
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29 Jul 02 | Business
20 Jun 02 | Business
22 May 02 | Business
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