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Wednesday, 12 February, 2003, 07:25 GMT
Japan fears shrinking feeling
Heizo Takenaka
Mr Takenaka plans to make money
Japan's government is piling pressure onto the Bank of Japan (BoJ)to inject more money into the country's economy.

The pressure comes ahead of figures due out on Friday which are expected to show the country's brief spell of economic recovery is over.

Friday brings both quarterly figures for economic growth and the regular meeting of the BoJ's policy board.

Interest rates in Japan are already practically zero - the only thing keeping many of its debt-ridden firms afloat - but politicians bereft of options want the bank to be radical.

All eyes will be on the change in gross domestic product between September and December, which most fear will show contraction and thus an abrupt end to the shortest economic revival since the Pacific War.

Bonuses cut

The consensus of analysts' forecasts predicts that GDP will prove to have shrunk 0.4% in the fourth quarter.

The slide is thought to be driven partly by the climbing yen.

But the main trigger is the continuing weakness of demand on the part of consumers at home.

Companies cut their annual bonuses - paid to staff in December and usually amounting to more than a tenth of annual salary - for the first time in three years.

With private demand at 60% of GDP, the effect was punishing, economists said, and rising profits and better export performance at some key firms such as Hitachi and Sanyo could do little to counterbalance it.

"Japan's economy peaked out at the end of last year," said Shuji Shirota, economist at Dresdner Kleinwort Wasserstein in Tokyo.

A sharp improvement in machinery orders between November and December - seen by some as an encouraging sign - was simply a blip, he said.

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